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This week brings earnings releases for prestigious IT companies. As online ad sales decline and investors turn away from risk, markets are closely monitoring the situation. Can it have an effect on cryptocurrency?
There are rumors that the second quarter’s large tech profits by FAANG businesses may disappoint. The key question is whether this will have an effect on the bitcoin market as a whole.
Amazon and Apple will release their reports on Thursday.
Expectations for Big Tech “FAANG” Companies’ Q2 earnings are gloomy
Although their earnings won’t have a direct influence on cryptocurrencies like Bitcoin (BTC) and Ether (ETH), the tech sector’s results may give investors insight into the forecast for the third quarter.
Over the past year, there has been a close and tighter association between cryptocurrencies and tech equities. MAANA results may provide insight into the performance of cryptocurrencies, provided that Bitcoin and its rivals continue to be coupled to the NASDAQ Composite.
The MAANA stocks suffered when Snapchat revealed dismal results as a result of subpar ad monetization. Shares of SNAP dropped 25%. Markets are concerned that Facebook and Twitter may both announce results that are below expectations. Netflix’s second quarter earnings fell 6% short of the Zacks Consensus Estimate.
The tailwind for internet advertising during the lockdown phase may be coming to an end as the country gets past the coronavirus. TikTok is a formidable competitor for user attention, which is compounding Silicon Valley’s problems.
Will the association between cryptocurrencies and stocks persist unabatedly is the key question for those who follow the crypto market. If so, a drop in tech stocks following the release of Q2 earnings might have a significant negative impact on cryptocurrency values.
For more than a year, the price of bitcoin has been associated with the S&P 500 index of the American stock market. Is Bitcoin a risk asset or a hedge in a bad market for cryptocurrencies and stocks?
In Q2, the correlation between the price of bitcoin increased
Late in April, the price of bitcoin on crypto exchanges declined in tandem with declines in U.S. stock indexes. According to Dow Jones market statistics, this increased the correlation between the price of Bitcoin and the price of stocks to a historic two-month rolling high of 0.53.
The 90-day correlation between the price of Bitcoin and the benchmark S&P 500 Index, used as a measure of American stocks, was 0.49 in March, according to the crypto analytics company Arcane Research. A newsletter published at the time by Arcane stated:
“Bitcoin’s correlation to the S&P 500 has only been higher for five days in BTC’s history, showing that the current correlation regime is unprecedented in BTC’s history.”
Those numbers, 0.49 and 0.53, show a significant association on a scale of zero to one.
According to the correlation rates, during the past 18 months, the price of Bitcoin has frequently moved in tandem with the prices of key U.S. stocks. That does not establish that the movement of one was caused by the price of the other.
Additionally, it doesn’t establish what criteria determine a product’s market price.
For instance, a research conducted by a search engine optimization company, SEM Rush, discovered a 0.91 connection between the price of Bitcoin and Google searches for “bitcoin price” in 2017, which is precisely what one should predict.
It is hard to predict what will take place next. The core Bitcoin thesis that it acts as a macro hedge, inflation hedge, safe store of value, and a tool to de-risk investors’ portfolios through asset class diversity will be put to the test in an exhilarating way by the current convergence of circumstances.
