Bitcoin (BTC) and the S&P 500 have been known to exhibit strong correlation in the past. However, this correlation is even more pronounced at critical points. For instance, when the S&P 500 started to rally back in late 2016, BTC/USD started to rally in early 2017. Similarly, when Bitcoin (BTC) topped out in late 2017, the S&P 500 topped out as well. Unlike BTC/USD, the SPX500 did not go through a very long correction. However, the correction was as intense in terms of magnitude. Both the S&P 500 and Bitcoin (BTC) are now at a long term trend line and are expected to rise from current levels. The S&P 500 is bounced off its long term trend line. Bitcoin (BTC) has done the same, and just like the S&P 500, it is likely to close the week in green.
Both Bitcoin (BTC) and the S&P 500 have managed to stay above the 21 Month EMA throughout their entire correction. Both have just closed the last month with a strong bounce off the 21 Month EMA. The last month was the final week of correction for both Bitcoin (BTC) and the S&P 500. As we move forward, Bitcoin (BTC) is likely to begin a new cycle outpacing the S&P 500 same as before. If the rise is as aggressive as before we could see Bitcoin (BTC) rise to $ 13,000 or higher by year end. However, early 2019 are going to be more significant in terms of gains. The price is preparing to make the transition from correction to a new cycle. This transition is expected to last till December 2018 after which we can see the price appreciate more aggressively.
This correlation with the stock market is not a coincidence. The Fed is expected to pursue a dovish policy from here on out. The trade war with China has hurt the United States significantly. Considering that the US is hell bent on putting China out of business, it is likely that they are not going to change that policy. Instead, the Fed will take a more soft approach and consider lowering interest rates. If things are not slowed down at this stage, we would head into the ultimate crisis a lot faster than expected. I think most economies around the globe are not prepared for that. There is an implicit understanding among them that they are not going to let the situation get that worse at this stage. As interest rates decline, borrowing will become cheaper again and markets will rise.
Bitcoin (BTC) is already prepared for a breakout. The weekly chart for BTC/USD shows that Bitcoin (BTC) could have broken out of the downtrend a lot sooner, but it did not. Instead, it ran the full course of correction and has now reached the extreme end of the triangle it is trading in. The chart shows two triangles that Bitcoin (BTC) is simultaneously trading in. If Bitcoin (BTC) breaks out of the larger triangle that would quickly shift the momentum in favor of the bulls. The 10 Week EMA is now very close to the 21 Week EMA. It will be extremely easy for the bulls to push the price from here to the upside. One small push above current levels has the potential to trigger the next bull run.
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