Bitcoin (BTC) and the leading stock market index S&P 500 have a historical correlation that has recently been challenged. This divergence suggests that either BTC is about to make a big move higher or the stock market is about to turn lower.
In particular, the senior commodity strategist at Bloomberg IntelligenceMike McGlone, noticed a divergence between both 100-week moving averages (MA). McGlone shared the discovery in a post on X on July 2, hinting that it was a leading indicator.
The S&P 500’s moving average is already 23% above its first-half close, the strategist said. By contrast, Bitcoin’s moving average is 2.4 times below its peak in Q1 2024.
Moreover, the higher time frame chart confirms the downtrend in Bitcoin momentum and also shows a divergence. If the historical correlation is to play out, we should expect either a fall in the stock market indicator or a rise in the Bitcoin indicator. McGlone predicts a “return” in the second half of this year.
Bitcoin Bearish and Bullish Contexts
As Finbold reports, Bitcoin is going through a tough time amid sell-offs by the German and US governments. Moreover, Mt. Gox announced a payout of over $8 billion in BTC, which has been expected for over a decade.
In this context, Bitcoin miners have begun to capitulate with record low reserves and hashrate produced. Meanwhile, longtime supporters like Peter Thiel have lost faith in the cryptocurrency’s fundamental value proposition.
However, the BTC price remains within its four-month range, testing support at $60,000, currently trading at $60,100. Crypto traders and investors still see a bright future for Bitcoin, predicting between $80,000 and $500,000, despite the fundamental issues.
BlackRock (NYSE: BLK) and other issuers of Bitcoin spot ETFs continue to promote the first cryptocurrency to traditional financial investors, which is expected to generate medium-term demand. Wall Street has recently sold off significant volumes, but ETFs continue to show positive capital flows on a monthly basis, indicating a bullish bias.
At the same time, the stock market, as measured by the S&P 500 index, benefited significantly from the performance of a small number of premium stocks such as Nvidia (NASDAQ: NVDA), leading to an imbalance.
Therefore, investors should closely monitor the financial market and use these indicators to gather investment ideas and make decisions. Caution is needed given the uncertain times with predicted volatility ahead.
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