While the world of finance can’t look past the recent year-to-date returns of Bitcoin and other cryptocurrencies, it’s the S&P 500 that has everyone glued to their seats.
The S&P 500 is at the most-watched trend line in global markets and the outcome could ultimately give BTC a major boost. Here’s why.
How The S&P 500 Could Give Bitcoin A Boost
For nearly the last 100 years, the S&P 500 has been the most prominent stock market index, tracking the performance of 500 of the largest US companies. It is the benchmark used to compare the performance of individual stocks.
Since the start of the pandemic Bitcoin and the S&P 500 become highly correlated, but that correlation has since dissipated. BTC has instead become more correlated to gold.
However, a major breakout in the S&P 500 could be on the horizon, which has the potential to give the cryptocurrency market an additional boost. And a big one at that.
Extreme bearish sentiment across finance would suggest that the stock market is on the cusp of the worst crash and bear market since 1929. But a breakout higher from an important trend line could lead to a surprising contrarian move to the upside instead.
Risk Appetite Could Return With Trend Line Breakout
A breakout in S&P 500 has little to do with Bitcoin itself, and any boost would be more due to the message it sends. It could convincingly end the bear market and cause a sudden change in trend.
Options data hints at some of the most significant bearish positioning in history, creating a ripe environment for a short squeeze for the record books.
A reversal in the stock market is also a reversal signal for risk assets in general, which is why Bitcoin and other cryptocurrencies could benefit indirectly from a clear breakout in the S&P 500.
The S&P 500 is up 1% on the day, trading at roughly 4050. Holding above the trend line drawn above is crucial to continuation to the upside for the stock market. Moving higher would also result in a golden cross in the S&P 500.
A Golden Cross In The Stock Market And Crypto On The Horizon
Bitcoin is at $23,000, but is still a ways off from a similar golden cross. Both the 50-day and 200-day moving averages have begun to curl upward, which could be an early indication of an impending cross.
A golden cross takes place when a short-term moving average crosses above a long-term moving average, and generates a buy signal in the asset. The death cross is the opposite sell signal, which happens when a short-term moving average crosses below the long-term moving average.
Although BTCUSD has yet to golden cross on daily timeframes, several altcoins such as Litecoin, Polygon, Fetch.AI, and more have already done so.
Elsewhere in finance, both gold and silver have golden crossed, while the DXY Dollar Currency Index suffered a death cross at the start of 2023.