S&P 500 Crash Will Drive Bitcoin Up

It’s been two weeks since the halving, and Bitcoin keeps consolidating around its psychological barrier of $10 000. All bullish attempts to hold above this key level failed, which proves that the cryptocurrency market needs a new fundamental trigger. The recent halving doesn’t seem to be enough to propel the BTC to new local maximums.

It is worth noting that such a catalyst may present itself in the very near future. The change in market sentiment in the US stock market may result in a new wave of sales in the global financial markets. Just this week, the SP500 index added about 5%, almost reaching the psychologically crucial resistance of 3,000. The index was last seen at this mark in early March when the global economy first encountered the devastating consequences of the COVID-19 pandemic. Such an impressive growth in the stock market would be justified only if the coronavirus were defeated, all quarantine measures were lifted and the borders were opened to resume the disrupted international trade processes. Since none of this has happened yet, the current SP500 recovery seems rather absurd.

To date, the US economy remains in a state of suspended animation. Most stores are closed, production is suspended, small and medium-sized businesses are on the verge of bankruptcy. Amid a continuing economic slowdown, we can conclude that the current growth of the US stock market is the result of unsupported investor confidence that the worst is behind us. The unprecedented support measures taken by the Federal Reserve, including the injection of trillions of dollars into emergency lending programs for the struggling businesses, as well as one-time payments to the population, have created the illusion of an imminent V-shaped economic recovery, which would be unforgivable for the market participants to miss out on.

It worth noting, that despite all the money spent to tackle negative consequences of the pandemic, the coronavirus spread has yet to be tacked - the United States remains the leader in the number of COVID cases. The decline is not expected either, which in turn should prolong the negative effect on the national economy. Growing trade tensions between the US and China can add a new portion of the negative sentiment to the market’s plate. Trump seeks to “punish” China for the coronavirus spread and pushes the Senate for more punitive measures. The lawmakers have already approved the bill permitting Trump to take sanctions against China for hiding the information about coronavirus. In response, China refused to fulfill a trade deal previously signed by the two countries.

Depressing macroeconomic statistics and vague prospects of the US economic recovery can send the stock market in a downturn at any time. During the scheduled online conference last week, Fed Chairman Jerome Powell noted that the economic recovery from the coronavirus pandemic could take “a while”. In his view, unemployment, which has already exceeded 16%, may climb higher, above 25% in the coming months. All this indicates that the scale of the current economic downturn is unprecedented in modern history and is much worse than any recession the country has gone through since the Second World War.

When global stock markets resume their bearish rally, investors will turn back to safe-haven assets as the alternative. The choice for market participants is quite limited: either classic gold or digital. There is only one difference: traditional gold has grown by only 12% since the beginning of this year, while BTC has recovered by 35%. Not to grieve about lost profits in the future, we recommend betting on Bitcoin’s more dynamic growth. In other words, now is the best time to invest in BTC/USD.