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Bitcoin has been closely tracking the traditional markets in recent months, which is part of the reason why it has been caught within such a persistent trading range since the start of May.
The equities market has been stable as of late, with its ongoing consolidation coming close on the heels of a historic rebound than can be accurately described as a “V-shaped” recovery.
It doesn’t appear that investors are too confident that the economic damages done by the ongoing pandemic will subside anytime soon. The current range-bound trading in equities will likely persist until more data elucidates how fast the economy will be able to recover.
This will undoubtedly influence Bitcoin’s price action one way or another, as the crypto has formed a tight correlation to the stock market.
In the near-term, this may play to BTC bulls’ favor, as one analyst is noting that a shifting global economic narrative could boost the cryptocurrency.
Bitcoin’s Weakness Doesn’t Invalidate Stock Market Correlation
At the time of writing, Bitcoin is trading down nearly 2% at its current price of $9,060. The cryptocurrency has been trading around this price level for the past few days.
Yesterday, buyers did attempt to propel BTC past $9,300, but this appears to have become a resistance level, as the rejection here is what caused it to slide down towards its current price levels.
BTC has formed a striking correlation to the stock market in recent months, although this has not held today.
Data from the analytics platform Skew elucidates this trend, showing that Bitcoin and the S&P 500 have seen a rising correlation in recent times.
Data via Skew.
All the benchmark indices were able to end the day in the green due to some positive data regarding unemployment numbers in the US.
Despite this rebound, the benchmark cryptocurrency is still flashing some major signs of weakness as it hovers just a hair above $9,000.
This correlation could degrade slightly in the near-term as both assets trade sideways but may then pick back up once the stock market begins trending in one direction or another.
Shifting Economic Narrative Could Bolster BTC, Claims Analyst
Luke Martin, the host of the popular Coinist Podcast and a respected analyst, explained that global economic narratives have been helping to shape Bitcoin’s price action.
As such, a new shift that these narratives are undergoing could help bolster the benchmark cryptocurrency.
“Stocks, BTC, & ETH all printed their highs around June 8th. •News cycle then: ‘[virus] cases spike as economy re-opens.’ •News cycle now: ‘As cases spike, hospitalizations & deaths continue decline.’ Add some positive economic news & we could see those highs again soon,” he explained.
Upcoming data regarding the growth rate of the pandemic and the longevity of its damages to the economy will likely play a considerable role in Bitcoin’s future price action.
Featured image from Shutterstock.
