On June 26, the Dow Jones index fell 2.84%, down 9.27% from the month. As risk-averse assets face fear of correction, lower BTC (BTC) prices may increase in the short term.
Although many fundamental factors cause a strong trend in the stock market, analysts point to low liquidity as the main catalyst. As the Fed began to decline, US stocks fell along with it.
The relationship between Bitcoin and the US in recent months has increased the likelihood of a lower BTC price.
All markets move cautiously, and Bitcoin is no exception.
Holger Chapitz, a global market analyst, explained that investors were initially forced to pump money out of the Federal Reserve. But with decreasing liquidity, various common risks, such as the number of HIV infections, began to affect investor sentiment.
Referring to a chart illustrating the relationship between the S&P 500 and global liquidity, Zschaepitz wrote:
This graph shows that stock investors are dependent on new stimulants as drug addicts. Without new liquidity for the central bank, a complex global economy, high market value and an increase in the number of desired cases.
Similarly, Bitcoin's price plummeted when the US stock market initially fell. Dow Jones saw its first significant fall in the week of June 23. Bitcoin also saw a sharp decline of $ 9,700 on the same day, which marked a decline of 7% in 24 hours.
For most of the past two years, Bitcoin's price has hardly correlated with stocks, as it moves depending on market dynamics. But the startling relationship between bitcoins and stocks, especially in the second quarter of 2020, shows that investors are still largely unsure.
Starting from the double-digit unemployment rate and the struggle to reduce the number of new viruses, there are many factors that impede the smooth recovery of the global economy.
Is short-term correlation necessarily a bad thing?
PlanB, the creator of the stock model alias for stock placement, said the short-term relationship between bitcoins and stocks could be positive.
A simultaneous increase between bitcoins, stocks and other risky assets may indicate that the mainstream sees BTC as its main asset.
“I see that this is good news. I would be very concerned if all these trillions of QE funds were directed to stocks, bonds, real estate, gold … but not to Bitcoin. The Fed is also pumping stocks, so knowing stocks and bitcoins together means that BTC is in the interest of the Fed. ”
If the Fed again increases liquidity as a result of deteriorating sentiment in the US economy, there may also be benefits from bitcoin prices.
In the short term, however, BTC charts indicate that a deeper fall can still occur. Technical analysts predict a possible drop to $ 7,000, almost 20%, given that the support level of $ 9,000 has been eliminated.
Cointelegraph Markets said yesterday that a well-known market analyst at Tone Vays believes that the range of $ 6,000 to $ 10,000 will remain in effect at least until the end of this year.