Key Takeaways:
- The stock market index S&P500 (SPX) could further tumble based on a historic fractal.
- Should that happen, Bitcoin and the rest of the crypto market could follow.
- BTC traders should trade carefully, as $12,000 could be the next destination.
YEREVAN (CoinChapter.com) – U.S. stock market index S&P 500 (SPX) risked erasing its Q3 gains based on headwinds from the Federal Reserve. As CoinChapter reported earlier, policymakers intend to pass another 0.75 percentage interest rate hike, which could send equities, and other risk-on assets such as Bitcoin into a spiral.
Justin Bennett, a professional Forex trader and the founder of the educational portal DailyPriceAction, confirmed the bearish outlook. He added insult to injury, pointing out that SPX charts formed similar fractals before the 2008 crash. Bennett also noted that the timing from the all-time high was identical as well.
Past is no guarantee for the future. However, the expert asserted that should the fractal repeat itself, S&P 500 could crash another 63%, which could be “devastating” for crypto as well.
And if that doesn’t seem possible, know that the S&P dropped 50% during the 2000 crash and 57% in 2008. The Fed was also in a MUCH better position to step in and save markets during both of those crashes.
added Bennett.
“The bottom is NOT in for stocks or crypto,” concluded the analyst. Some Bennett followers criticized the “Armageddon” approach and noted that they would “all be millionaires” if the charts repeated themselves.
However, considering equities before placing bets might play out beneficial for cryptocurrency traders, given the high correlation between SPX and Bitcoin.
Also read: 3 reasons why Bitcoin market awaits another punishing selloff in HY2022.
Bitcoin still correlates with equities.
Bitcoin has often been hyped as an “inflation hedge” and called “digital gold.” However, the previous months witnessed a unison between the alpha crypto and risk-on assets once the money printer halted. Furthermore, the evidence to support the claim is mounting, as Bitcoin’s price action mimics that of stocks, albeit with higher volatility.
Morgan Stanley analyst Sheena Shah commented that wide adoption as payment is one of the possibilities for Bitcoin to decouple from risk-on assets.
The correlation between bitcoin and equity indices has remained high and will continue to do so unless bitcoin becomes widely used as a medium of payment – which looks unlikely to happen soon.
said the expert.
The analyst noted that the correlation originated from the shift in BTC traders. She explained that while once retail investors dominated the crypto market, “institutional money” now drives the demand/supply dynamic.
Hence, if the charts spell doom for the stock market, Bitcoin and the rest of the crypto market will likely follow suit.
BTC charts agree with the bears.
Meanwhile, as CoinChapter covered in July, the flagship crypto could see another crash as low as $12,000 in the current quarter. In detail, the BTC/USD chart confirmed a formation dubbed the ‘bear flag.’ The latter occurs after a crash and takes the asset price slightly higher before another similar crash.
BTC lost 7.5% of its price on Aug 19 and broke below the support, confirming the pattern. The setup formed in mud-June, after a 35% crash, which pins the predicted price level at approximately $12,000, or 40% lower than the current value.
