Cryptocurrencies, particularly Bitcoin, are increasingly being treated as risk assets similar to technology stocks, despite Bitcoin proving to be a distinct asset class. Its high correlation with the U.S. stock market index, the S&P 500 (SPX), which encompasses America’s top 500 companies, continues to influence its behavior in relation to macroeconomic developments.
Recent data shows that while Bitcoin’s correlation with gold has weakened, its strong positive correlation with the SPX remains intact. This correlation suggests that both Bitcoin and the broader crypto market react similarly to macroeconomic trends, mirroring the risk-on and risk-off sentiments of investors.
The U.S. stock markets, represented by the SPX, have been performing strongly, with a continuous rise over the past 9 weeks. If this streak extends to 11 weeks, it could surpass records set in 1985. The SPX’s more than 24% gain in 2023 reflects increasing expectations of interest rate cuts for the year.
Despite some profit-taking at the 4,793 level, the SPX trend remains upward. However, a negative divergence in the Relative Strength Index (RSI) could be an early warning for a potential downturn. Sellers are struggling to push the index below 4,690, while the 20-day exponential moving average continues to serve as a key support level.
A bounce from this support or the current range could lead to a test of the psychological resistance at 5,000, which would be favorable for Bitcoin. Conversely, a drop to 4,502 in the SPX is anticipated in the opposite scenario.
The U.S. Dollar Index (DXY), which measures the dollar’s performance against a basket of currencies, has been fluctuating within a wide range for several months. A recent descent to support levels suggests that the 102.26 mark could become a strong resistance. A break below 101 could lead to a level of 99.57, which would likely contribute to further gains for Bitcoin, as a weakening dollar typically supports Bitcoin price increases.