The correlation between Bitcoin (BTC) and the S&P 500 index is witnessing a significant shift as both asset classes continue to record divergent value movements.
In this regard, market expert Ali Martinez suggested in a July 11 X post that this decoupling could indicate a substantial move ahead for Bitcoin.
Notably, Bitcoin’s price and the S&P 500 index have diverged significantly over the past month. While Bitcoin retraced to $54,000, the S&P 500 surged to new all-time highs. This divergence is particularly striking, as the two assets had previously shown a strong correlation.
Historically, Bitcoin and the S&P 500 have often moved in tandem, reacting similarly to market-wide factors such as changes in economic data, investor sentiment, and macroeconomic trends. However, the recent breakdown in this correlation raises questions about the future trajectories of both markets.
Bitcoin and S&P 500 correction chart. Source: Santiment/ali_charts
“It’s been over a month since the correlation between Bitcoin and the S&P 500 broke. While $BTC retraced to $54,000, the S&P 500 hit new all-time highs. Only time will tell if BTC will catch up!” he noted.
Implication of Bitcoin and S&P 500 divergence
Indeed, the analyst highlighted the uncertainty and speculation surrounding Bitcoin’s next move amid the current bearish sentiments. If Bitcoin were to follow its historical pattern, it might catch up to the broader market’s bullish trend.
The market is anticipating Bitcoin reclaiming the last record high of above $70,000 as a confirmation of the bullish trend. This level has been identified as a crucial anchor to targeting and claiming $100,000.
On the other hand, the continued divergence could signal a new phase for Bitcoin, where its price movements become increasingly independent of traditional equity markets.
It is worth noting that the surge in the S&P 500 index has emerged as several stocks lead the gains, leaving behind the rest of the market. Mostly, technology stocks have dominated the index, and analysts believe it is poised for a correction.
Conversely, Bitcoin and the crypto sector corrected due to a myriad of factors, with incidents such as the Mt. Gox repayments and the German government’s sale of its Bitcoin holdings causing panic in the market.
At the moment, Bitcoin is aiming to reclaim the $60,000 resistance after avoiding a sustained drop below the $55,000 mark. At press time, the maiden crypto was trading at $58,831 with daily gains of over 1%. On the weekly chart, Bitcoin is up 3%.
Overall, in the short term, Bitcoin’s next price movement will likely be influenced by inflation data, which is also likely to impact the S&P 500.
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