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Breaking News: Coinbase Confirms DOJ Investigation Following Major Security Incident

S&P 500 Sell Signal May Drag Bitcoin Back Toward Black Thursday Lows

Tony "The Bull" Severino
Tony "The Bull" Severino
5 years ago
3 mins read

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The lingering correlation between Bitcoin and the S&P 500 may be soon coming back to haunt the cryptocurrency market if a chillingly accurate sell signal sends the major US stock index tumbling back towards Black Thursday lows.

Could the correlation cause the same for the first-ever cryptocurrency?

Bitcoin’s Continued Correlation With the S&P 500 Could Lead to Repeat of Black Thursday

Prior to the historic Black Thursday collapse, the S&P 500 and many major stock indexes set a record for a new all-time. Before the quarter ended, however, a record was set for the worst quarterly close in stock market history.

At the same time that the S&P 500 was tapping highs, Bitcoin was trading at above $10,000 – a key level said to be the remaining resistance between current levels and a retest of the asset’s all-time high set back in 2017.

During that time, Bitcoin price reached $20,000, then later fell to as low as $3,200.

Related Reading | Strong Correlation Between Bitcoin and Stock Market May Finally Be Over 

The Black Thursday collapse that crushed the S&P 500 also sent Bitcoin tumbling from $10,000 back to under $4,000. There was no escaping the liquidity crisis as the investment community realized a recession was more than likely as a result of the pandemic.

Since then, a strong correlation has remained between the S&P 500 and Bitcoin. The major US stock index and the leading cryptocurrency by market cap both have made a sharp, V-shaped recovery – a sign that often indicates a bottom is in.

Is The Recovery In These Two Markets Sustainable With Stimulus?

Fears of a false bottom are mounting, however, and an accurate sell signal triggering on the S&P 500 may cause another retest of Black Thursday lows, or worse. And due to the correlation that Bitcoin continues to share with the index, any downside in the stock market could spill into the cryptocurrency yet again.

Economic stimulus packages have kept stock valuations high, and stimulus checks have provided investors with additional funds they don’t mind risking on crypto assets like Bitcoin.

Related Reading | New COVID-19 Lockdown Proposal Poses Unique Threat to Bitcoin’s Ongoing Momentum

While all of this has helped the S&P 500 and Bitcoin’s recovery from lows, it may not be enough to keep markets afloat for the long term. Uncertainty surrounding any economic reopening plans are leaving investors skeptical about returns, and fears of inflation are causing investors to rethink their holdings.

This could benefit Bitcoin as the asset becomes more looked at as a hedge against inflation like gold, but for now, the cryptocurrency remains more correlated to stocks than the precious metal market.

bitcoin btcusd spx sp500 correlation

In the chart above, however, it is clear that Bitcoin goes through periods where it is correlated with the S&P 500, and other times when it is not. After spending a few weeks now anticorrelated against the stock index, the correlation appears to be returning and it could spell disaster for the first-ever crypto asset.

Making matters worse, the TD Sequential indicator has issued a 9 sell signal on the S&P 500.  This incredibly accurate signal has worked well in crypto markets, but was designed by traditional market timing wizard Thomas Demark.

If the setup confirms, and the S&P 500 dumps, BTC could be in trouble.

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Tony "The Bull" Severino
Tony "The Bull" Severino

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.

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Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality
Created by industry experts and meticulously reviewed
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