- Bitcoin price jumped on Monday after a calm weekend session.
- The cryptocurrency’s gains followed a global market rise led by Chinese stocks.
- Meanwhile, analysts warned about a deep correction in the stock market. It may hurt Bitcoin’s upside prospects, as well.
Bitcoin rose Monday on uplifting global risk-on sentiment led by a rally in Chinese markets.
The benchmark cryptocurrency jumped 2 percent to circa $9,277 in the early New York session. Nothing inside the crypto market behaved as a catalyst behind the intraday rally. Nevertheless, Bitcoin’s gains surfaced in tandem with similar upside moves in the US stock market, confirming a correlated short-term trend.
The S&P 500, for instance, opened 1.2 percent higher on Monday, while its Wall Street peers, the Dow Jones Industrial Average and the Nasdaq Composite added 1.1 percent and 1.8 percent to their valuations, respectively. Their gains also tailed an incredible rally in China’s Shanghai Composite.
The Asian index soared to its highest level since early 2018, buoyed by sentiments about a robust economic recovery in China. Traders noted that the mainland’s retail investors pushed the Shanghai Composite by as much as 5.7 percent. European and US stocks exposed to China, therefore, rose in tandem. Bitcoin followed suit.
Red Signals for Bitcoin
Thomas Gatley, an analyst with research firm Gavekal Research, meanwhile warned investors about the sudden jump in Chinese stocks, noting that equities completely gave up their historical relationship with earnings.
“The prospects for year-on-year earnings growth cannot justify this exuberance,” he said, adding that non-financial corporate earnings in China fell by 51 percent during the first-quarter.
Other analysts and strategists pointed out easy liquidity as the major reason behind the rally in Chinese stocks.
That left Bitcoin in a catch-22 situation. The cryptocurrency’s intraday gains came in the middle of its lowest volatile periods. Traders sought guidance from large investors on the next price direction, but Bitcoin remained stuck in a narrow $9,000-9,300 trading range in the last two weeks.
4 hour MACD showing double loss of selling momentum each time price attempted $8900 – this is very obvious indication of exhaustion of sellers and trend reversal
Beartards calling loss of $9k imminent – I don't understand how their primitive brains are circuited pic.twitter.com/cf0rLGQjxi
— ๑ Panda ๑ (@RamenofBinance) July 6, 2020
That said, if the Wall Street indices tend to correct lower on profit-taking sentiment, they would also expose Bitcoin to a similar bearish bias. The cryptocurrency could, therefore, fall back to retest $9,000 as its support level. Meanwhile, breaking below the level could send it as low as $8,600 in the short-term.
On the other hand, a continuous stock market rally may help Bitcoin extend its upside move towards $9,500. A breakout above the said resistance level would have traders retest $9,800 as their short-term upside target.
Photo by Joshua Earle on Unsplash