Bitcoin has been consolidating below resistance for months now, waiting for a spark to ignite an explosion in either direction. Due to the ongoing correlation between BTC and stocks, a crashing global stock market could drag down crypto with it once again.
Continued Correlation Between BTC and S&P500 Has Kept Crypto Down
Since the start of 2020, Bitcoin and the stock market have had an uncanny and unusual correlation. This initially crushed crypto when the stock market collapsed in a panic-induced selloff in mid-March.
That day is now referred to Black Thursday due to just how chaotic and devastating it was. Bitcoin price plummeted over 50% in 48 hours from above $8,000 to under $4,000.
The stock market that previously set all-time highs just days prior, fell so low it set the worst quarterly close on record at the end of the carnage-filled month.
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The pandemic proved to be too much for markets to withstand. But after the sharp selloff, the same markets have since made a V-shaped recovery that has yet to complete.
Before Bitcoin and the S&P 500 reclaim highs set in early 2020, another drop could happen as cases of the virus once again spiral out of control.
Between the pandemic round two incoming, and the continued strain on the economy, global stock indices have finally started to fall again.
Starting today, so did Bitcoin – is the greater global stock market dragging down the crypto market once again?
Bitcoin BTCUSD Correlation With S&P 500 Stock Index | Source: TradingView
Bitcoin Begins Fall To Retest Lows, Due To Global Stock Indices Floundering
An early July pump out of the Independence Day holiday, stemming from bullish Chinese stock advances and a soaring yuan, also pushed BTCUSD and the rest of crypto higher.
The return to risk appetite caused altcoins to begin popping off left and right, as Bitcoin traded mostly sideways, despite a meager advance.
Major stock indices spiked globally, and due to the correlation between the crypto asset and the S&P 500, BTC was expected to follow.
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But even with positive news that a vaccine is potentially near, the global stock market is finally feeling the crunch of cases resurging.
The Dow Jones Industrial Average, S&P 500, the Shanghai SE Composite Index, and the Hang Seng stock indices all plummeted over the last 24 hours.
At the same time, a Twitter scam involving Bitcoin has also prompted the crypto asset to start falling from its consolidation range.
Combined with the bearish sell pressure from stocks, it could take the crypto market back down to retest former lows, or perhaps set a new lower low.