Stock indexes, including the Nasdaq Composite and the S&P 500, have begun to rebound. Amazon reported pandemic high sales, which resulted in a threefold increase in profits and reported revenue growth of 37%. Facebook also beat Wall Street’s expectations with $ 21.5 billion in revenue in the third quarter.
While the correlation between bitcoin and US stocks has dropped in recent weeks, the likelihood that rising market sentiment will lead to a risky curve for BTC remains high. As explained by Kevin Swenson, researcher at Krakens Cryptowatch, the market trend between Bitcoin and the S&P 500 is “the same 80% of the time.”
Thus, Swenson suggested that the relationship is likely to return: “The only second week in 2020 that does not have a correlation was at the very bottom of a global pandemic crash when #BITCoin clumped ahead of the S&P 500. Remember, ‘correlation’ cannot be calculate as a percentage of profit or loss. We are talking about the direction of the market: an uptrend or a downtrend. ”
The US stock market entered reporting season after several weeks of recession. Historically, earnings season has been a net positive for stocks, serving as a short-term catalyst. This could put Bitcoin (BTC) in a unique position as it accumulated throughout October despite the fall in US stocks. If risky assets start to rise, there is a chance that they could positively impact Bitcoin.
If Bitcoin starts to show some correlation with the S&P 500 again, the season of positive earnings will be accompanied by strong Big Tech numbers, which could give Bitcoin an additional boost. However, there is some evidence to suggest otherwise.
Dennis Vinokurov, head of cryptocurrency exchange research and broker Bequant, told Cointelegraph that earnings in the US stock market tend to fluctuate, but the latest reporting season may have little impact on the overall market sentiment. He said the November 3 U.S. presidential election was a more important key factor that could diminish the importance of profit, adding:
Markets are now in the middle of the third quarter, and despite the global downturn following the Covid-19 pandemic, 85 percent of companies exceeded expectations by an average of 19 percent, well above the historical average of three to five. percent. However, markets tend to focus not only on earnings data, but also on recommendations, which, given the limited visibility of the epidemic in question, were very weak. ”
Vinokurov also confirmed that Bitcoin could retire in the short term, pointing out that if Bitcoin rises in October due to election uncertainty, the post-election cycle could weaken Bitcoin. Since October 1, Bitcoin has surged from $ 10,775 to over $ 13,300 and peaked at $ 13,859 on October 28.
There will also likely be a slight short-term pullback or consolidation phase given that $ 13,875 has served as a multi-year resistance zone since 2018. Vinokurov suggested that “if you look at history, the uncertainty about the US elections is the main positive. Drivers, so by default the solution should lead to disconnection and therefore some inconvenience. ”
Jay Hirsch, CEO of eToro’s U.S. trading platform, told Cointelegraph that he doesn’t see bitcoin’s earnings season going too far. Hirsch pointed out that the US stock market won’t have much of an impact on Bitcoin:
So far, the reporting season has been positive for the markets: a large number of companies have exceeded forecasts and may have limited the overall downside risk in wholesale sales, at least for now. However, the relationship between bitcoin and stocks has largely collapsed in recent weeks and I don’t see how profits could affect BTC in the near future. ”
Another mathematical method that shows the correlation between bitcoin and US stocks is declining is the price-to-value ratio of the bitcoin network, or NVT. NVT Price calculates the value of bitcoins based on the market price and the amount of bitcoins transferred to the blockchain per day. Bitcoin price NVT also fell in correlation with the S&P 500, said network analyst Willie Wu.