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Nexo

How Turning Stock Sentiment Could Deal A Death Blow To Bitcoin

Tony Spilotro by Tony Spilotro
1 year ago
in Bitcoin
0

Bitcoin is now trading in the low $40,000 range after a swift and sharp sentiment change. With the top cryptocurrency on the ropes currently, a massive breakdown in the stock market could be the fatal blow that puts the final nail in the bull market coffin.

Here’s how turning stock market sentiment, a change in risk appetite, regulation, and much more could be devastating for Bitcoin.

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The Dow Jones Looks Heavy, Why It Could Weigh On Crypto Bulls

It hasn’t just been crypto that’s been setting new high after high. The stock market has also been in a full “froth” with explosive runs in company shares like GameStop, to hot button IPOs, and SPACs left and right.

Stimulus money flowing let risk appetite grow ravenous, pushing top stock indices and the biggest cryptocurrencies like Bitcoin and Ethereum to record highs.

Related Reading | SEC Warns Investors Of “Highly Speculative” Bitcoin Risk

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But thanks to a number of factors, risk appetite is quickly turning, it is has the Dow Jones – a barometer of the success of the stock market and economy – looking heavy.

Factors include recent comments from Fed Chair Jerome Powell, and warnings from economists that the bubble was boiling over. Even the SEC issued a warning about speculative assets like Bitcoin. With the forceful hand of regulation also hovering, things could soon take a turn for the worst.

And with Bitcoin already hurting, the stock market turning over now could be nasty for cryptocurrencies.

bitcoin dow jones

The Dow is hanging by a thread and could take Bitcoin down if it topples | Source: DJI on TradingView.com

Why Bitcoin Could Be In Trouble If Stocks Come Tumbling Down

“Only up” season has ended, but there’s still plenty of speculation on whether or not the bull market is over for Bitcoin.

The top cryptocurrency is down, but not out. However, after being left on the ropes due to Elon Musk and a variety of FUD and bearish technicals, the Dow Jones crashing could be devastating for the top crypto asset.

Related Reading | Why Bitcoin Doesn’t Need Musk, Saylor, Or Anyone Else 

The chart above shows a larger rising wedge pattern and corresponding behavior in the MACD that brought about Black Thursday last year.

If risk appetite totally turns here, a similar sized drop could result. Bitcoin spent most of its existence uncorrelated from stocks. But post-Black Thursday the correlation stuck for a while until crypto went parabolic.

If the correlation returns aggressively, the stock market selloff could wipe out a lot more of Bitcoin’s bull rally, before it ever reaches the prices that holders had been expecting.

Bitcoin has never known a true bear market as stocks have been in a secular bull run its entire existence. How will the scarce but speculative asset perform when risk appetite fully turns?

Featured image from iStockPhotos, Charts from TradingView.com
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a digital media executive and global remote work leader with a decade of content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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