Analysts and experts are expecting a stock market crash soon. Bitcoin may experience the same fate because of three main factors. The financial market and crypto industry experts envision a great stock market correction happening in the short term. There is a strong possibility that Bitcoin could follow suit, considering the high correlation of Bitcoin with stocks as observed in the past three months.
On June 11, the US stock market experienced a big deal of volatility. It was after the Dow Jones Industrial Average dropped by around 7%. The blow was led by double-digit drops of airline stocks. The factors which seem to trigger the volatility in the stock market are major geopolitical risks, uncertainty around the COVID-19 pandemic, and institutions moving to cash and bonds over stocks.
Slumping appetite for high risk-assets
Winifred Cisar Stieglitz, Wells Fargo’s head of credit strategy, explicated on Bloomberg Real Yield that investors have a significant pile of cash. She further stated that investors are favoring investment-grade or low-risk bonds rather than stocks. High net worth investors and institutional investors see various risks in the global stock market.
In the near time, Bitcoin has to see consistent demand from institutions and investors in China. It has to so that the price of BTC to remain above a key support level at $9,100. It should aim toward previous peaks at $14,000 and $20,000. If the traders within the cryptocurrency market increasingly move to hedge their assets through Tether, it is likely that BTC will follow the trend of the stock market.
Billionaires leaving risk-on assets with uncertainty around stocks
Wall Street barons and billionaires stressed that they opt to strengthen their hedge positions and cash reserves. Mark Cuban, Paul Tudor Jones and Warren Buffet prefer it rather than entering the stock market. Cuban said on CNBC’s Closing Bell that he thinks it’s almost impossible to predict where the consumer and corporate demand is going to come from. He added, because of that, it’s hard to create a valuation for businesses.
On the other hand, high-profile investors are not necessarily predicting a great downturn in the U.S. stock market. According to the data, they are just struggling to set any valuation for large-scale companies because of the consequences of the coronavirus pandemic.
Bitcoin’s weak technical structure
Bitcoin is at a point where a further downtrend would mean that a strong correction is unavoidable in the upcoming months. Satoshi Flipper, cryptocurrency trader hinted on his tweet about BTC’s critical moment.
Top crypto traders are afraid that Bitcoin will be open to a deep pullback. It is due to the historical significance of the $10,500 price level. Bitcoin rejected to below $7,000 every time it has come close to rising above it since the third quarter of 2019.