Stocks Have More to Bleed While Bitcoin Retests Resistance Below $20K

Key Takeaways:

  • Stocks have further to fall, experts say.
  • The correlation between equities and the crypto market persists.
  • Bitcoin (BTC) is likely to follow the macro-lead and tumble more in the current quarter.
Stocks have more to bleed while Bitcoin retests resistance below $20K

YEREVAN (CoinChapter.com) – The stock market suffered heavy losses for three quarters. As a result, the S&P 500 index dropped over 27% year-to-date, dragging the risk-on assets like Bitcoin down for the ride.

However, experts insist that the stocks will bleed more, albeit accepting the geopolitical unpredictability.

Stocks Plummeting

Analytical platform Ecoinometrics compared the current stock market drawdown to previous crashes in history, concluding that the 27% drop is not nearly as severe.

The Great Depression of 1929 is the worst on record. A -86% drawdown and 25 years to recover. Who knows if we’ll ever get such a large correction. But if that happens, I’d expect the Fed to be using the money printer so that it wouldn’t last a generation.

commented the platform.
S&P 500 index dropped over 27% year-to-date

Ecoinometrics also asserted that the Great Recession drawdown lasted six years and bottomed 58% below the all-time high. “If we enter a global recession, this could happen again,” the expert concluded.

Wall Street Expects Another Leg Down

Meanwhile, Wall Street is also worried, trying to identify the source of the coming “rapture.” Jamie Dimon, the chief executive of financial giant JPMorgan Chase, has been ringing bearish bells since Q2.

If you make a list of all the prior crises, sitting here we would not have predicted where they came from, though I think you could predict at this time that it probably will happen. So if I was out there, I’d be very cautious.

said the CEO.
stock market index S&P 500 index (SPX) plummeted over 27% year-to-date.
S&P 500 index (SPX) plummeted over 27% year-to-date. Source: TradingVIew.com

Mohamed El-Erian, chief economic advisor at financial services company Allianz, agreed with the bearish outlook.

The Fed is so late, it will probably break something on the way to reducing inflation. The most likely victim is economic growth. I think the marketplace is starting to recognize that the risk of recession and what that does to earnings is an issue.

said the expert.

Meanwhile, as prognoses for the stocks get grimmer, the crypto market follows as the next likely victim.

Bitcoin Charts in Tandem With Stocks

As CoinChapter noted in the previous Bitcoin review, the alpha crypto correlated with the stock market throughout 2022. As of mid-October, the tandem remains fairly strong due to the abundance of mainstream fund inflow affecting the crypto market.

Bitcoin and the stock market in tandem.
Bitcoin and the stock market in tandem. Source: TradingView.com

Thus, as the correlation persists, Bitcoin and, by extension, the whole crypto market remain dependent on the stock market, the dollar strength, and the broader economy.

Charlie Morris, chief investment officer at ByteTree Asset Management, commented on the stock and crypto drawdown, citing the importance of the Fed’s upcoming actions and, subsequently, the dollar value.

The dollar hasn’t been this pricey since 1985, and at some point the Fed will cool off. When that happens, both bitcoin and gold will respond well. Just as a strong dollar caused them pain, a weak dollar will bring relief.

commented the expert.

BTC Price Retests The Resistance Below $20K

Bitcoin (BTC) started the week in red, retesting a resistance instrumental since late May. As CoinChapter reported earlier, the flagship crypto formed a bearish setup dubbed the ‘descending triangle.’ If confirmed, the pattern could take the BTC price below $10,000, the lowest value since 2018.

Bitcoin (BTC) price  in a descending triangle.
Bitcoin (BTC) price in a descending triangle. Source: TradingView.com

The dropping trading volumes intensified the selloff fears, proving the traders’ unwillingness to dive into risk-on assets in turbulent economic conditions. Thus, the crypto market bulls eye more pain ahead as the stock market, and digital assets continue to tumble.

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