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Bitcoin is melting. Here’s what a 30% drop in crypto highs could say for stock market sentiment sentiment

What does the fall in bitcoin prices over the weekend portend for US stocks?

Bitcoin BTCUSD,
+ 0.31%
it is assumed to be an asset that is not strongly correlated with stock markets or any other traditional asset in this regard, but some analysts point out that the cryptocurrency is traded at a closer pace with parts of the market against the background of the recent turbulence in stocks as investors try to assess the most effective strategies for playing an economy recovering from the worst pandemic in more than a century.

In a blog post on Sunday, Michael Kramer of Mott Capital said the recent breakdown of bitcoins could signal that Wall Street̵

7;s risk appetite is in transition – possibly bearish.

“Bitcoin tells us that the risk mood in the market as a whole is changing, and we care about bitcoins because we care about the risk mood,” Kramer wrote.

Mott Capital Management

Bitcoin prices fell 28% from a peak to $ 64,829.14 in mid-April, and trading on Sunday was volatile for the world’s most famous crypto after tweeting from a bull with digital assets and Tesla Inc. TSLA,
+ 3.16%
CEO Elon Musk has been interpreted as a threat to land the $ 1.5 billion investment in bitcoin, which the electric vehicle company announced back in February.

Take a look: Instead of “Will crypto fall to zero?” Investors should ask this question instead, says strategist

Kramer said that the upward sentiment that has been characteristic of the markets lately – even against the background of last week’s volatility – could be downward and that one of the aspects of the market that can move most closely in line with bitcoins, is a small -capitalization of stocks, such as those in the index RUS 2000,
+ 2.47%.

Mott Capital Management

Russell 2000 closed on Friday, marking its biggest weekly percentage drop since March 26, at 2.1%. It was usually a week of stock-breaking, even if the stock enjoyed a solid rally to end the five-day trading period marked by inflation concerns in the middle of the week. Dow Jones Industrial Average DJIA,
+ 1.06%,,
S&P 500 SPX,
+ 1.49%
and loads with Nasdaq Composite Index COMP technologies,
+ 2.32%
all recorded their biggest weekly losses since February 26, and the Nasdaq also recorded its longest weekly losing streak, four in a row, since August 23, 2019.

Read: “Stuck and distorted”: investors struggle with inflation that could test the Fed’s framework

Kramer said the “bitcoin is melting” and added that the asset may have more room to fall.

Several technical analysts see that bitcoin could reach $ 42,000. Katie Stockton, a market technician and founder of Fairlead Strategies, said there was support around the area for the coin, which hit just over $ 43,800 over the weekend.

So what does all this mean for stocks? It’s hard to say.

Futures for Dow YM00,
Index S&P 500 ES00,
and Nasdaq-100 NQ00,
all traded moderately lower on Sunday night.

Some analysts see that stocks are moving up towards the end of 2021, although bitcoins are moving.

Tom Lee, founder of Fundstrat Global Advisors, predicts that the S&P 500 will rise another 7% to 8% from current levels, and he maintains his broad market benchmark target of 4,400.

Lee said attempts by markets to “collapse” last week had failed, and he saw parallels between last year’s decline and the current period, which he blamed, at least in part, on tax adjustments, which were extended to May 17.

“In other words, the market can’t panic enough to push it even lower,” Lee wrote.

“Instead, we saw a strong rally in the second half of the week. We believe that this rally will be postponed this week as well. In fact, we believe that the shares are still on the verge of reaching new highs before June 30, “he predicted.

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