Is A Bitcoin (BTC) Negative Correlation With Stocks A Bullish Signal? Analyst Reveals
August 21 2024 - 5:00PM
NEWSBTC
Bitcoin (BTC) and U.S. stocks have shown a negative correlation
lately, with Bitcoin often moving in the opposite direction of
traditional markets. This divergence has caught the attention of
analysts and investors, especially as the cryptocurrency enters a
period of consolidation along with the broader crypto market.
Historically, shifts in this correlation—from negative to
positive—have often signaled a bullish trend for Bitcoin.
Related Reading: Battleground At $60,000: Bitcoin Faces Pivotal
Test As Bulls Aim To Reclaim Key Support As both markets face
challenges, the changing dynamics between BTC and U.S. stocks could
provide crucial insights into where the market is headed. Investors
are closely watching this relationship, anticipating that a shift
could indicate a potential breakout for Bitcoin. Bitcoin Data
Suggests Potential Uptrend The negative correlation between Bitcoin
(BTC) and the U.S. stock market, particularly the S&P 500
(SPX), has become increasingly evident. Prominent analyst and
trader Daan on X recently highlighted this phenomenon by overlaying
the BTC/USDT futures chart with SPX prices. His analysis shows that
while traditional markets like the SPX have experienced a swift
recovery, Bitcoin has not followed suit. This divergence
underscores the decoupling between these two markets, with Bitcoin
lagging behind the broader stock recovery. Another key analyst,
Caleb Franzen, brought attention to this trend, sharing data
revealing Bitcoin’s negative correlation with major stock indices.
Specifically, Franzen points out that the 90-day correlation
between Bitcoin and the Nasdaq-100 ($QQQ) currently stands at -27%.
This negative correlation suggests that as tech stocks recover,
Bitcoin has been moving in the opposite direction, which can
signify unique market dynamics. While periods of negative
correlation between Bitcoin and stocks are not inherently bullish,
historical evidence suggests that positive market shifts often
follow such phases. The critical point for investors is to monitor
a potential reversal of this correlation—when Bitcoin begins to
move in tandem with the Nasdaq-100 ($QQQ) once again. If Bitcoin’s
correlation with tech stocks turns positive, it could signal a
strengthening market and a possible uptrend for BTC. This shift
could provide a key indicator for timing potential entry points in
the market. BTC Price Trading Below A Key Indicator Bitcoin trades
at $59,350, below the critical daily 200-day moving average (MA) at
$62,915. This moving average is a key indicator many analysts use
to gauge market trends. When BTC’s price is below the daily 200 MA,
it typically suggests a downtrend or a significant correction.
Conversely, trading above this level indicates market strength and
bullish momentum. For Bitcoin to confirm the continuation of its
bull market, it needs to reclaim the daily 200 MA and consistently
close above it. This would signal a potential shift in trend,
providing confidence to traders and investors that the bullish
phase is still intact. Currently, BTC is hovering around the key
psychological level of $60,000, and the market remains in a
consolidation phase after enduring months of uncertainty and
volatility. For the bullish scenario to unfold, Bitcoin must break
above $63,000, retaking the daily 200 MA and surpassing the August
8th local high of $62,729. This would mark a significant recovery
and indicate that the market is regaining its strength. Related
Reading: Battleground At $60,000: Bitcoin Faces Pivotal Test As
Bulls Aim To Reclaim Key Support On the other hand, if BTC fails to
close above $57,500 in the coming days, it could signal further
downside pressure, potentially leading to a pullback to sub-$50,000
levels. The coming days will be crucial in determining whether
Bitcoin can regain its upward momentum or if more bearish pressure
lies ahead. Cover image from Dall-E, charts from TradingView.
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