Reading time: ~2 m
On the Bitcoin chart, the moving average (MA) lines with a period of 50 and 200 days crossed. The signal of the indicators is well known to traders who survived the crypto winter of 2018, this crossing option is called the “Death Cross”, which is considered a forecast of a long-term decline in the asset.
The digital currency has been in a downtrend since November 2021, the fall of BTC coincided with the moment of tightening the monetary policy of the US Federal Reserve.
Bitcoin, like stock market stocks, has been vulnerable to a reduction in the QE market stimulus program. The degree of correlation of cryptocurrencies with stock indices has been growing since 2018 and has strengthened most strongly since the crisis of 2020.
Fundamentally, the “Death Cross” has grounds for the realization of a negative scenario for Bitcoin to fall below $40,000, which will be facilitated by the plans to increase the Fed’s rate in March. The stock market will react negatively to this move, pulling cryptocurrencies down with it.
However, in the coming week, the correlation of Bitcoin with stock indices can play a positive role. Quarterly reporting season is upon us, and analysts are expecting another record earnings growth for S&P500 stocks by 22%. Other global indices are also expected to increase their returns.
The events of the end of January can also have a positive impact on cryptocurrencies and the stock market. At the upcoming meeting of the Fed, the head of the department plans to promote the thesis of tightening monetary policy without harming the economy. This means a delay in raising the rate until May, which will give stock indices and digital currencies a chance to “gain price headroom” to compensate for the spring fall.
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