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BITCOIN CAUTIOUS AS ANALYST PREDICTS PULLBACK IN RISK-ON MARKETS IN JULY

  • Bitcoin is trending sideways within a $300 trading range for the last two weeks amid growing uncertainty in risk-on markets.
  • Traders expect the cryptocurrency to attempt a breakout but remain unsure about the direction of the next price move.
  • Meanwhile, analyst Larry Williams suggests the S&P 500 could climb further only to fall back hard by the end of July.
  • Bitcoin and the S&P 500 have formed a record high correlation in recent weeks.

No one can tell what is in Bitcoin’s mind these days.

The benchmark cryptocurrency rose by more than 150 percent from its March 13 nadir. Its gains followed a steep crash in the wake of a global market rout that practically hurt every traditional and new asset as investors moved to the safety of cash.

  • Bitcoin is trending sideways within a $300 trading range for the last two weeks amid growing uncertainty in risk-on markets.
  • Traders expect the cryptocurrency to attempt a breakout but remain unsure about the direction of the next price move.
  • Meanwhile, analyst Larry Williams suggests the S&P 500 could climb further only to fall back hard by the end of July.
  • Bitcoin and the S&P 500 have formed a record high correlation in recent weeks.

No one can tell what is in Bitcoin’s mind these days.

The benchmark cryptocurrency rose by more than 150 percent from its March 13 nadir. Its gains followed a steep crash in the wake of a global market rout that practically hurt every traditional and new asset as investors moved to the safety of cash.

And the S&P 500 is flashing red signals.

A CORRECTION UNDERWAY

Jim Cramer, an analyst at CNBC’s Mad Money, warned Tuesday that the uptrend in the S&P 500 could run out of fuel by the end of July.

He said the index eyes a climb of 4-5 percent “over the next two weeks” but the rally may start fizzling out by July 28. Mr. Cramer reasoned his bearish take with the scheduled expiry of unemployement benefits at the end of the month – and with two technical indicators provided by another analyst, Larry Williams.

S&P 500’s red line tends to forecast trend reversals, putting Bitcoin at risk of falling. Source: CNBC

The first indicator, as shown in the chart above, is a “red line” that changes direction ahead of an S&P 500 reversal. Meanwhile, Mr. William’s second indicator is an advance/decline line. It pits the number of rising stocks against the falling ones to spot peaks before a market sell-off.

S&P 500’s Advance/Decline chart peaked in June. Source: CNBC

So it seems, the Advance/Decline ratio peaked earlier in June 2020.

“Again, you can see that the S&P lags the advance/decline line, which went to a new high in early June,” Mr. Cramer said. “If history is any guide, Williams, therefore, expects the S&P 500 to make a new high about a month and a half later.”

THE BULL CASE FOR BITCOIN

The S&P 500 prediction points to a bleaker scenario for Bitcoin.

The cryptocurrency, nevertheless, holds strong above $9,000, as confirmed by analyst Michaël van de Poppe on Tuesday. Another market observer Qiao Wang, a crypto analyst and former head of product at Messari, sees the S&P 500’s influence on Bitcoin as a positive sign.

He noted earlier this week that investors should use the correlation to dump stocks and buy Bitcoin – instead of pursuing an opposite strategy. Mr. Wang asserted that the central bank’s money-printing plans would eventually lead “inflation goes through the roof,” leaving Bitcoin as the true defense.

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