Bitcoin (BTC): S&P 500 Outlook And SEC Postponement Likely To Hasten The Fall

Bitcoin (BTC) appears vulnerable once again as bad news from the SEC and the grim outlook of the stock market signal further decline just when the price has run into a long term trend line resistance. We have previously pointed out the correlations between BTC/USD and the S&P 500 (SPX). Bitcoin (BTC) being part of a high risk emerging market often takes a bigger fall whenever the S&P 500 declines. This is very reasonable to see as investors try to get out of riskier assets whenever the stock market is in a decline. The majority of investors have no doubt that the stock market is a ticking time bomb and it could explode any time. This is why every time the S&P 500 runs into a strong trend line resistance or becomes overbought short term, we see assets like Bitcoin (BTC) decline sharply.

The daily chart for S&P 500 (SPX) shows that the next few months could see more bloodshed in the stock market and it is extremely likely that the cryptocurrency market will be hit even harder. The cryptocurrency market has a very positive outlook long term and the market is down more than 90% from its all-time high but that does not mean things could not get any worse. At both good times and bad times, markets often behave irrationally. This time will not be an exception and therefore the best idea is to plan for alternating outcomes instead of presuming that the price of Bitcoin (BTC) has bottomed or it hasn’t. We have also mentioned in some of our previous analyses that the bond market which is traded by professionals is a better indicator of the looming dangers in financial markets. Whenever investors become more interested in long term bonds despite their low yields, it is a strong sign that something is not right short term.

If we look at the daily chart for BTC/USD it is easy to see that the price has failed to breach the trend line resistance many a time. After every rejection, the price has decline to the trend line support. In other words, if the price fails to break past this resistance, we are looking at a decline to the trend line support to say the least. Considering that the price is trading in an ascending triangle which also forma a part of a major bear pennant, we can expect a lot more downside should BTC/USD break below this triangle.

The Stochastic RSI has now become overbought on both the daily and weekly time frames and it is only a matter of time before we see a sharp decline in Bitcoin (BTC). Whether or not that decline will be sustainable remains to be seen but overall outlook of major financial markets indicates that it will be. In fact, the most probable scenario will be for the price to keep on decline for the next few months till it bottoms out somewhere between $1,000 and $3,000.