Many Bitcoin analysts agreed that Bitcoin would stop rallying after its price hit $ 14,500. The cryptocurrency appeared to be overbought in the medium term, a technical warning that is usually a downward correction.
But the bearish calls faded into the background on Thursday as Bitcoin expanded its uptrend to over $ 14,500 and moved less than $ 100 closer to the $ 15,000 level. A majority of retailers / investors apparently ignored the “overbought” warnings as the hype led to caution.
Bitcoin changed hands for up to $ 14,945 before the New York opening bell. Profits, it appeared, followed precisely similar upward moves in the S&P 500 futures, further confirming their erratic positive correlation.
Bitcoin S&P 500 maintains a positive correlation as the former is targeting $ 15,000. Source: BTCUSD on TradingView.com
Bitcoin-S&P 500 maintains a positive correlation as the former targets $15,000. Source: BTCUSD on TradingView.com
The cryptocurrency and the US benchmark rose in sync in an environment of ultra-low interest rates and unlimited quantitative easing by global central banks. According to the Wall Street Journal, the S&P 500 will “see its sharpest rally in a week since April” on Thursday.
Basics Take the front seat
S&P futures rose 1.98 percent as investors grappled with the prospect of a corporate tax reform bill.
Democratic candidate Joe Biden drew closer to wrest the presidency from his Republican rival Donald Trump. Even so, the Republicans won enough seats to possibly retain control of the Senate. At the same time, the Democrats have gained a foothold in the House.
That split the government. Investors noted that it would be difficult for Mr. Biden to pass laws to increase corporate taxes and regulate technology companies. As a result, tech stocks, which now make up around 18 percent of the S&P 500, rose higher.
WHAT? US election jam strengthens Big Tech as a safe haven. Tech stocks like Facebook & Alphabet rose faster than non-tech stocks after neither Trump nor Biden got a quick win. Chances are, DC paralysis means tech giants should evade the most damaging antitrust game. https://t.co/b3jkryV05c pic.twitter.com/AI1e0cjNkE
– Holger Zschaepitz (@Schuldensuehner) November 4, 2020
Bitcoin traders appeared to have shadowed the stock market as they raised their bids on the cryptocurrency. Even so, they ignored this deadlock between the Democratically controlled U.S. Congress and the Republican-led Senate that could delay the second coronavirus bailout.
Both Bitcoin and the S&P 500 rose this year due to a rising budget deficit. Traders believed that adding $ 2.3 trillion of liquidity to the market would reduce the dollar’s purchasing power. This prompted them to turn their capital into riskier assets.
Bitcoin techniques indicate divergence
A long-term outlook on the Bitcoin price rally showed again that the cryptocurrency was overbought – and an asset whose volume is going in the opposite direction of its price gains.
Bitcoin points to a bearish correction as the RSI rises above 70 and volume falls. Source: BTCUSD on TradingView.com
Bitcoin hints bearish correction as RSI surges above 70, volume dips. Source: BTCUSD on TradingView.com
The Relative Strength Index, a pulse oscillator, is approaching a detectable deflection level at 79.49. Meanwhile, the weekly trading volume is moving down against the rising price. Both indicators point to an imminent bearish correction.
Should autumn happen, it does not necessarily mean the end of the Bitcoin uptrend.
Traders with a long-term risk appetite would use local levels of support to buy back Bitcoin. Global central banks have raised global debt to an unsustainable 320 percent of GDP. Lending rates are also either close to zero or below.
As a result, investors get low returns in the cash and bond markets. Bitcoin will likely benefit from this.