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Bitcoin

BITCOIN’S 150% RALLY FROM $3,700 MAY FADE AS WALL STREET EYES WEAK EARNINGS

  • Bitcoin has added about $73 billion to its market capitalization since its March 13 low. But BTC’s chances at ballooning further into the second half of 2020 look meager.
  • One of the primary reasons for this sentiment is Bitcoin’s positive correlation with the S&P 500.
  • The benchmark US index has surged by ~43 percent from its March low but risks correcting lower ahead of a weaker corporate earnings season.

Bitcoin has added about $73 billion to its market capitalization in the last three months. Nevertheless, the leading cryptocurrency has reached a point where it does not have a clue about what to do next.

The analogy appears out of Bitcoin’s boring sideways action over the past two weeks. The BTC/USD exchange rate stands stuck between a range defined by $9,500 and $9,000. Traders appear in a bias-conflict as the bitcoin market runs out of concrete short-term fundamentals, such as the May’s halving event that pushed its price up towards $10,500.

Bitcoin price stuck in a trading range. Source: TradingView.com

The only catalyst that seems to function is Bitcoin’s growing positive correlation with the S&P 500. Both the markets recovered in tandem from their March lows, helped by the Federal Reserve’s decision to introduce an open-ended stimulus program to aid the economy through the pandemic-induced lockdown.

The S&P 500 rose by more than 43 percent from its March 23 nadir. Like Bitcoin, the index also appears in a bias-conflict, with its technicals telling a bullish story and fundamentals a bearish one.

As analysts second-guess each other on the next course of the stock and the bitcoin market, a trendsetting event is getting ready behind the curtains.

NO GUIDANCE FROM 80% S&P 500 FIRMS

Bloomberg, in its latest report, confirmed that the S&P 500 index is rising despite receiving clear forward earnings guidance from the companies listed on it.

The coverage surfaced at a time when observers are sure about corporates experiencing their worst second quarter since the financial crisis. About 80 percent of them have ignored to guide for the next three months. That said, investors have no clue about whether or not their investments would yield any decent return.

“Investors are going to start demanding a little bit more clarity – whether it’s good or bad, they just want to know,” said David Lebovitz, a global market strategist at JPMorgan Asset Management.

SPX Profit Estimates down from $150 a share to $124.50 a share. Bitcoin at risk. Source: Bloomberg

Then, banks will start the second-quarter reporting season in the next two weeks. Strategists from Bank of America expects a profit contraction of about 44 percent. Nevertheless, the S&P 500 is maintaining its gains. And the same goes for Bitcoin that is – more or less – tailing the US index’s sentiment.

HOPEFUL BITCOIN INVESTORS

As fundamentals hinting a breakdown scenario ahead, Bitcoin risks plunging below the $9,000-range. Nevertheless, specific crypto traders expect a stock market rally ahead that may take the cryptocurrency out of its slumber. One of them said on Monday:

“S&P 500 is going to hit ATH again soon there is still likely a lot of sidelined money in traditional markets, particularly AMs. 4th Q S&P higher [means] BTC higher.”

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