The correlation between the S&P 500 and Bitcoin is just increasing, inching closer to reaching levels where up to now the cryptocurrency strengthened.
Meanwhile, the S&P 500 just closed its January monthly session outside of a key trend line the complete world of finance has been watching. Here is why a possible breakout within the stock market could propel BTC higher together with it in an ideal storm scenario.
The Stock Market Closes Monthly Candle Above Key Trend Line
The S&P 500 index is commonly considered the perfect measure of the general health of the US stock market, and not directly, the economy. It’s used as a benchmark to check the alpha and beta of other assets and individual stocks.
Positive performance within the SPX is related to periods of prosperity and profitability. If the stock market is doing well, it’s a signal for investors to modify to risk-on strategies.
The S&P 500 might be breaking out of a year-long pattern | SPX on TradingView.com
The S&P 500 is potentially breaking out of the upper boundary of a long-term trading pattern: a descending broadening wedge. Price is holding above the pattern on the every day timeframe through the January monthly that just got here to a detailed.
And while further upside would bode well for cryptocurrencies by default, increasing correlation between BTCUSD and the SPX is what makes a possible breakout within the stock market that far more bullish for Bitcoin.
Bitcoin Correlation With S&P 500 Index Increases
The chart above shows the breakout in motion within the every day and monthly timeframe within the S&P 500. Bitcoin price is moments away from closing its January monthly candle with greater than 40% ROI. Other cryptocurrencies have significantly outperformed throughout the month.
Each BTCUSD and SPX rising in tandem this month has restored the increasing direction of the correlation between the 2 vastly different investment vehicles.
The correlation with the stock market is just increasing | BTCUSD on TradingView.com
With a correlation coefficient of 0.88, the SPX and BTCUSD are at a number of the strongest positive correlations historically. Past bear markets in crypto have switched Bitcoin into negative correlation territory. This time, nevertheless, has been different.
An increasing correlation has up to now been related to a few of Bitcoin’s most explosive bullish moves to the upside – especially after reaching a correlation of 0.93. With the correlation potentially increasing and a possible breakout within the SPX, could there be an ideal storm brewing for the highest cryptocurrency by market cap?
