Major S&P 500 is experiencing what is known as a TD9 sell signal and is likely to cause a massive bear market in the near future. Bitcoin traders on the other hand are appearing to stand resolute and expect an uptick in price in the near future.
Last time the markets fell so badly was back in March this year when major stocks lost tens of points on an average basis due to the growing concerns of a spreading pandemic. Bitcoin too witnessed a major short term price tank on March 12 and 13 when the price dropped from $9000 to $3800 before stabilizing around $5000 in the aftermath.
Many analysts were quick to point out this correlation and declared that Bitcoin had a strong correlation with conventional markets including the stock market and thus it couldn’t be considered a store of value or a safe haven in tough times. Both Bitcoin and the stock market revived strongly after the major governments around the world announced huge bailout packages worth trillions of Dollars to help revitalize diving economies.
Bitcoin, however wasn’t bailed out and yet it performed strong nonetheless showing that not a lot of correlation is involved. Now the stimulus package apparently running out, markets are once again on the brink of a major price tank. Now there is another test that might show whether Bitcoin has automatic correlation with the stock market. If the cryptocurrency remains stable or gains value during the latest stock market dive, the correlation is weak and situational and if the cryptocurrency tanks alongside the major conventional assets, it will once again show that currently, the crypto market does have a correlation with conventional sectors.
A TD9 signal occurs when the market shows considerable price increase for a considerable time with no significant pullbacks. Basically, it occurs when the latest nine candles are higher than the four prior to them. It shows buyer exhaustion and is a sign that bears are ready to take back control and return stronger than ever. This increasing buying spree is very odd considering many businesses have been hit by the Coronavirus pandemic and many analysts are calling it speculation.
However, despite the sell signal, ultimately it is the market that will decide the future index. Bitcoin has shown some correlation with conventional stocks, but it is also seen that the Bitcoin and even conventional assets can ignore these obvious signals and continue to post record growth over time.
Image source: pixabay.com
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