Why Tightening Correlation With S&P 500 Could Be Bullish For Bitcoin 


The correlation between the S&P 500 and Bitcoin is only increasing, inching closer to reaching levels where in the past the cryptocurrency strengthened. 

Meanwhile, the S&P 500 just closed its January monthly session outside of a key trend line the entire world of finance has been watching. Here is why a possible breakout in the stock market could propel BTC higher along with it in a perfect storm scenario. 

The Stock Market Closes Monthly Candle Above Key Trend Line

The S&P 500 index is often considered the best measure of the overall health of the US stock market, and indirectly, the economy. It’s used as a benchmark to compare the alpha and beta of other assets and individual stocks. 

Positive performance in the SPX is associated with periods of prosperity and profitability. If the stock market is doing well, it is a signal for investors to switch to risk-on strategies. 

S&P 500 SPX

The S&P 500 could be breaking out of a year-long pattern | SPX on TradingView.com

The S&P 500 is potentially breaking out of the upper boundary of a long-term trading pattern: a descending broadening wedge. Price is holding above the pattern on the daily timeframe through the January monthly that just came to a close. 

And while further upside would bode well for cryptocurrencies by default, increasing correlation between BTCUSD and the SPX is what makes a possible breakout in the stock market that much more bullish for Bitcoin. 

Bitcoin Correlation With S&P 500 Index Increases

The chart above shows the breakout in action in the daily and monthly timeframe in the S&P 500. Bitcoin price is moments away from closing its January monthly candle with more than 40% ROI. Other cryptocurrencies have significantly outperformed during the month.

Both BTCUSD and SPX rising in tandem this month has restored the increasing direction of the correlation between the two vastly different investment vehicles. 

BTCUSD Bitcoin SPX correlation

The correlation with the stock market is only increasing | BTCUSD on TradingView.com

With a correlation coefficient of 0.88, the SPX and BTCUSD are at some of the strongest positive correlations historically. Past bear markets in crypto have switched Bitcoin into negative correlation territory. This time, however, has been different. 

An increasing correlation has in the past been associated with some of Bitcoin’s most explosive bullish moves to the upside – especially after reaching a correlation of 0.93. With the correlation potentially increasing and a possible breakout in the SPX, could there be a perfect storm brewing for the top cryptocurrency by market cap? 

Follow @TonyTheBullBTC on Twitter or join the TonyTradesBTC Telegram for exclusive daily market insights and technical analysis education. Please note: Content is educational and should not be considered investment advice. Featured image from iStockPhoto, Charts from TradingView.com

#Tightening #Correlation #Bullish #Bitcoin


Related Posts

Sequoia Capital, Paradigm among VCs facing ‘tricky’ FTX investor lawsuit

[ad_1] Users of bankrupt crypto exchange FTX have reportedly taken aim at financiers who promoted the platform suggesting their efforts added an “air of legitimacy” to the…

IND vs AUS: Shreyas Iyer declared fit for the second Test; Jasprit Bumrah to miss the ODIs as well

[ad_1] India’s star batter Shreyas Iyer who did not play the first Test between India and Australia due to a lower back injury, has been declared fit…

Sen. Warren vows reintroduction of AML bill that extends to DAOs and DeFi

[ad_1] A bi-partisan anti-money laundering (AML) bill that covers “decentralized entities” such as decentralized finance (DeFi) protocols and DAOs will soon be reintroduced to Congress, according to…

IND vs AUS: “I Had A Tough Time, Dale Steyn And Morne Morkel Were At Their Peak”

[ad_1] Indian batter Cheteshwar Pujara will play his 100th Test match against Australia at the Arun Jaitley Stadium in Delhi starting Friday, February 17. And ahead of…

Dogecoin, Shiba Inu Soar As Elon Musk Announces Twitter CEO

[ad_1] Elon Musk, who is still searching for a new Twitter CEO, jokingly introduced a dog as Twitter’s new CEO, sending the prices of Dogecoin, Shiba Inu…

Chetan Sharma’s sting operation: Here are the startling revelations made by Team India’s chief selector

[ad_1] Former India cricketer and current chief of the BCCI selection committee Chetan Sharma has made some shocking revelations in a massive sting operation conducted by Zee…

Leave a Reply

Your email address will not be published. Required fields are marked *