Troubles for Bitcoin as Goldman Issues Serious Stock Market Warning
- Bitcoin price wavered on Tuesday as traders awaited second-quarter earnings from the most prominent American banks.
- The reports expect to provide more details about the status of the US economy, which may indirectly impact the Bitcoin market.
- Meanwhile, Goldman Sachs noted that it expects S&P 500 earnings per share to plummet by 60 percent in the second quarter.
- The banking giant will also release its quarterly earnings report on Tuesday.
As the second-quarter earnings season kicks off, Bitcoin is bracing for a significant impact on its market.
An otherwise uncorrelated asset, Bitcoin has ducked its popular safe-haven status to rally and plunge alongside the US stock market. Since March 2020, the benchmark cryptocurrency has formed an erratic correlation with the S&P 500 – it last week hit a record high.
Bitcoin-S&P 500 correlation since March 2020 crash. Source: TradingView.com
That leaves Bitcoin exposed to macroeconomic narratives. The impact was evident after the US Department of Labor published an optimistic non-farm payroll data on Friday. Bitcoin rose alongside the S&P 500, breaking towards its technical resistance level of $9,400.
Shaky Week
But heading into the new week, the cryptocurrency is facing new challenges in the form of corporate earnings reports.
Influential US firms will release their second-quarter results in July 2020. It would provide investors a detailed outlook on how the US economy fared during the COVID-induced lockdown.
The reports would also follow an impressive stock market recovery from its March 23 nadir. Yet, specific reports show that S&P 500 earnings will be strikingly divergent from its bullish performance. American banking giant Goldman Sachs has authored one of these studies.
Analysts led by the bank’s chief equity strategist, David Kostin, wrote in a note Friday that they expect S&P 500’s earning per share to plunge by 60 percent in Q2. If realized, it would be the US benchmark’s sharpest contraction since the 2008-09 financial crisis.
“2Q earnings season kicks off in earnest next week, with the large US Banks reporting results. Consensus forecasts S&P 500 EPS will decline by 44% year/year in 2Q, but we believe earnings will fall by 60% in the quarter.” – wrote Goldman’s analysts.
SPX Earnings per share. Source: FactSet
A weak earnings report will prove that the post-March rally in the S&P 500 was, in part, speculative. It may end up negating part of the index’s recent gains. That could also expose Bitcoin to similar downside risk, given its growing correlation with the US stock market.
Bitcoin Crash
Equities are also showing signs of trouble. Futures tied to the S&P 500 on Tuesday wobbled between gains and losses as investors awaited Q2 results from the American banking moguls, including Goldman Sachs, JP Morgan, Citigroup, and Wells Fargo.
Meanwhile, Bitcoin was trading 0.50 percent lower in a bias-conflict zone. So it seems, the cryptocurrency’s traders are waiting for the S&P 500 to establish its intraday bias before they decide on the direction of their next positions.
Bitcoin consolidating sideways amid macro uncertainty. Source: TradingView.com
Joāo Leite, the lead analyst at investment management firm Blockfyre, warned that Bitcoin is trading inside a bubble long-term. He cited a string of macro factors that may end up crashing both the S&P 500 and Bitcoin in the coming sessions.
“I don’t think 32m jobless, 32% of home payments not being made in June, companies filing bankruptcy, and another round of shutdowns is “priced in” during the rallies back to [all-time highs]. Just waiting for the knife twist on the [S&P 500] and [Bitcoin].”
At the same time, independent analyst Michaël van de Poppe believes Bitcoin will not go down below $9,000.
Photo by Marvin Esteve on Unsplash
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Yashu Gola, Khareem Sudlow