How will this influence Bitcoin (BTC)?

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The S&P 500 Index (SPX) broke through long-term resistance today and hit its highest level in over a year.

If a positive correlation with the price of Bitcoin is restored, it could signal a resumption of the bullish trend in the cryptocurrency market.

What is the S&P 500?

The Standard and Poor’s 500, or simply the S&P 500 (SPX), is a stock market index that tracks the performance of the 500 largest publicly traded companies in the United States. It is one of the most followed stock market indices.

The S&P 500 Index is a market capitalization-weighted index. According to Wikipedia, as of August 31, 2022, the nine largest companies on the S&P 500 list accounted for 27.8% of the index’s market capitalization.

In order from highest to lowest weighting, these were: Apple, Microsoft, Alphabet, Amazon.com, Tesla, Berkshire Hathaway, UnitedHealth Group, Johnson & Johnson and ExxonMobil.

The SPX list dates back to the 1950s. Since then, the index has followed a long-term upward trend and reflects the health of the US economy.

Long-term chart of the S&P 500. Source: Wikipedia SPX reaches its annual high

The SPX had been in a downtrend since reaching the all-time high (ATH) of $4818 on January 4, 2022. Thereafter, almost the entire year was a bear market, ending with a low at $3492 on Oct 11, 2022. price followed the descending resistance line (black).

Since then, SPX started an uptrend and rose 24% to reach today’s valuation at $4338. In early 2023, the descending resistance line was crossed and then validated as support (orange circles).

At the same time, the SPX price struggled with resistance in the $4200 area (green line). This important area has repeatedly acted as support and resistance. If a correction occurs, a new bullish test of this level is expected.

Furthermore, today the SPX broke through another important resistance at $4325, which was the high reached in August 2022. If the increase turns out to be not just a deviation and the uptrend holds, the next level of resistance is at $4635. This will be the last stop before the ATH at $4818.

SPX chart by Tradingview

It is worth mentioning that despite the strong increase, the Relative Strength Index (RSI) has not yet entered overbought territory. However, in favor of the bears is the fact that for 1.5 years. Whenever the RSI reached the 70 area, the price recorded a local peak and fall (blue areas).

An analyst on Twitter, @MisterSpread suggested that even though the SPX price is now falling into the $4200 area. This would still be a bullish signal. He said the S&P 500 could be entering a “manic phase, when markets can stay irrational longer than people can stay liquid.”

Does the correlation with BTC indicate a rebound in the CryptoMarket?

The long-term correlation of the S&P 500 index with Bitcoin remains mostly positive. This applies to both downtrends and uptrends. For example, the correlation of the two assets remained positive for most of the 2022 bear market.

It was only at the end of the year that the correlation became negative. At that time, the SPX was already in an accumulation phase and BTC was still reaching a macro bottom due to the FTX crash and its aftermath in November 2022. However, the increase in SPX and the negative correlation with BTC at the time could have served as an early signal of a bullish trend reversal.

A similar situation occurred in February/March 2023. The correlation turned negative for a brief period. This came as Bitcoin’s correction proved to be much more severe than the S&P 500’s mostly sideways trend.

SPX and BTC Correlation by Tradingview

Finally, we are currently seeing a negative correlation again since mid-May. SPX is rising and breaking through an important resistance level. At the same time, BTC is stuck in sideways and slightly bearish momentum. If the situation unfolds similar to the previous two cases, we can expect the cryptocurrency market to follow in the footsteps of traditional assets.

This could cause Bitcoin to retest and possibly even break through the resistance at the $31,000 level. However, if the positive correlation is regained by the joint decline of both markets, the closest support for BTC price will be the 200-day moving average at $23,600.

For the latest crypto market analysis from BeInCryptos, click here.

Disclaimer

In accordance with Project Trust guidelines, this price analysis article is provided for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to providing accurate and unbiased reports, but market conditions are subject to change without notice. Always do your own research and consult a professional before making financial decisions.

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