Yerevan (CoinChapter.com) — Bitcoin and tech stocks have mostly moved hand-in-hand every since the coronavirus pandemic prompted a global market crash in March 2020.
What followed later was protective measures from central banks worldwide, all of them focusing on injecting more cash liquidity into their economies. That raised the prospect of higher inflation, further driven higher by a depreciating US dollar and falling interest rate returns on government bonds. Of course, riskier assets became the major beneficiaries as investors looked for better yields elsewhere. Bitcoin boomed all across 2020 and keeps on climbing in 2021. Tech stocks climbed, as well.
But the gains also brought fears of the froth and excessive speculation. One latest example is Dogecoin, a bitcoin-like cryptocurrency that started as a joke in cryptocurrency in 2013. At times propagated by Elon Musk, the dogecoin price rallied by as much as 9,443 percent in 2021, backed by just hype and no concrete fundamental. That said, Bitcoin and tech stocks also rallied under extreme risks of major downside correction, with Seeking Alpha’s Ronald Surz recommending investors to “get off before the inevitable burst.”
The Bitcoin-Tech Stock Correlation
However, the latest corporate earnings session has provided a backstop to the ongoing market rally. According to FactSet, about 30 percent of the companies listed on the S&P 500 index have reported results so far, with 88 percent of them delivering earnings per expectations. Alphabet, which backs Google, reported strong earnings across several fronts, with YouTube revenue rising by nearly 50 percent to $6 billion.
Alphabet stock corrects after setting up a record high on Monday. Source: GOOGL on TradingView.com
Microsoft grew 17 percent while pushing its operation revenue up by 31 percent to $17 billion. Tesla also reported growth but a majority of its gains came from its regulatory credits and bitcoin investments.
The solid Wall Street earnings session coincided with a strong upside recovery in the Bitcoin market. The BTC/USD exchange rate climbed 18.60 percent after bottoming out near $47,044 last week. At its weekly high, the pair was changing hands for $55,794.
A stronger US stock market reduces investors’ tendency to seek profits elsewhere. In turn, that reduces the selling pressure in the Bitcoin market. Erratic, but the correlation between tech stocks and bitcoin has shown itself fully during the March 2020 rout. Back then, investors unloaded their bitcoin profits to seek cash so they could cover margin positions in other traditional markets.
More Upside Cues
Heading into Wednesday, Facebook and Apple will release their Q1 earnings report. Both Bitcoin and US stocks were wavering ahead of the said financial results, driven lower by intraday profit-taking sentiment. But expectations of continued gains persisted also as the Federal Reserve concludes its two-day policy meeting later in the day.
“The post-meeting statement is likely to be little changed, other than to note the firming of momentum in activity and employment and the pick-up in headline inflation,”
JPMorgan analyst Michael Feroli wrote in a note Friday.
The Fed wants to push inflation above 2 percent. It also wants to let the inflation stay there before showing any signs of tapering. That has so far prompted investors to hedge their capital away from the US dollar and its dependent markets. For instance, yields on the benchmark US 10-year Treasury note climbed this year but remain near historically low levels.
Bitcoin…
…hopes to sustain above crucial support levels, given its growing influence on Wall Street as an inflation hedge.
Anthony Pompliano, a prominent Bitcoin advocate, wrote in his newsletter that after Tesla’s decision to sell 10 percent of its bitcoin holdings on profits, more corporates would add the flagship cryptocurrency on their balance sheets.
“The idea of proving bitcoin’s liquidity in both directions, buying and selling, will hopefully convince more CEOs, CFOs, and corporate executives that bitcoin can serve as a cash equivalent,” he wrote. “As this slowly becomes pervasive across corporate America, bitcoin’s role as a digital currency will strengthen. It is no longer a question of “if” in my opinion, but rather “when.”
Tech stocks hope to stay on an upside course owing to similar reasons.
Yashu Gola is a Mumbai-based finance journalist. He is profoundly active in the bitcoin space since 2014 – and has contributed to several cryptocurrency media outlets, including CoinChapter, NewsBTC, FxDailyReport, Bitcoinist, and CCN.
Academically, Yashu holds a bachelor's in information technology, with majors in data structures and C++ programming language. He has also won the 'Atulya Award' for his efforts towards raising $100,000 for an India-based farming project.
According to Bank of America, cash holdings among investors have increased, causing bearish risks for Bitcoin (BTC) & the...
Our Partners
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept”, you consent to the use of ALL the cookies.
This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. These cookies ensure basic functionalities and security features of the website, anonymously.
Cookie
Duration
Description
cookielawinfo-checbox-analytics
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Analytics".
cookielawinfo-checbox-functional
11 months
The cookie is set by GDPR cookie consent to record the user consent for the cookies in the category "Functional".
cookielawinfo-checbox-others
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Other.
cookielawinfo-checkbox-necessary
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookies is used to store the user consent for the cookies in the category "Necessary".
cookielawinfo-checkbox-performance
11 months
This cookie is set by GDPR Cookie Consent plugin. The cookie is used to store the user consent for the cookies in the category "Performance".
viewed_cookie_policy
11 months
The cookie is set by the GDPR Cookie Consent plugin and is used to store whether or not user has consented to the use of cookies. It does not store any personal data.
Functional cookies help to perform certain functionalities like sharing the content of the website on social media platforms, collect feedbacks, and other third-party features.
Performance cookies are used to understand and analyze the key performance indexes of the website which helps in delivering a better user experience for the visitors.
Analytical cookies are used to understand how visitors interact with the website. These cookies help provide information on metrics the number of visitors, bounce rate, traffic source, etc.
Advertisement cookies are used to provide visitors with relevant ads and marketing campaigns. These cookies track visitors across websites and collect information to provide customized ads.