According to the rumours, big tech earnings from FAANG companies in quarter two may disappoint. It is unclear if this will have an effect on the wider market and, consequently, cryptocurrency.
Apple and Amazon will follow suit with reports Thursday.
Expectations for Q2 Earnings by Big Tech “FAANG”, Companies Are Glum
Although their earnings will not directly impact cryptos such as Bitcoin (BTC), Ether (ETH), the crypto markets might be able to look at tech earnings for a better understanding of the Q3 outlook.
Over the past year, there has been a tightening and close correlation between crypto and tech stocks. MAANA earnings can be a good indicator of how crypto will perform as long as Bitcoin and its peers aren’t separated from the NASDAQ Composite.
MAANA stocks suffered a setback after Snapchat reported disappointing earnings because of poor ad-monetization. SNAP shares fell 25%. Markets are worried that Twitter and Facebook will also report earnings misses for the same reason. Netflix missed Zack’s Consensus Estimate of earnings for quarter two by six percentage.
The lockdown-era digital advertising tailwind that was a part of the coronavirus era may be ending as the nation moves past it. TikTok’s fierce competition for user attention is adding to Silicon Valley’s woes.
Crypto market watchers need to know if the correlation between stocks and cryptocurrency will continue unchanged. A tech stock drop after Q2 earnings could be a major headwind to crypto prices.
Since over a year, Bitcoin’s price has been closely correlated to the S&P 500 U.S. stock index. Is Bitcoin a hedge? Or a risk asset in a bearish market when stocks and crypto are trading at a lower price?
The Bitcoin Stock Price Correlation is Strengthened into Q2
The price of bitcoin on cryptocurrency exchanges dropped in April as U.S. stock indexes fell. According to Dow Jones market data, this caused the Bitcoin-tostock prices correlation to reach a new two-month high of 0.53, which was a record according to Dow Jones.
Arcane Research, a crypto analytics firm, measured the 90-day correlation of Bitcoin price to the U.S. benchmark, the S&P 500 Index at 0.49 in March. An Arcane newsletter reported that the correlation between Bitcoin price and U.S. equities benchmark, the S&P 500 Index, was 0.49.
“Bitcoin’s correlation with the S&P 500 was only five days higher in BTC history. This shows that the current correlation regime in BTC history is unrivalled.”
These 0.49 and 0.53 numbers represent strong correlations on a scale from zero to one.
These correlation numbers indicate that Bitcoin prices have moved with major U.S. stock markets over the past year and a half. This does not mean that one price caused the other to move.
This doesn’t mean that the market price for these assets is the same. However, the strong correlation implies that there are shared determinants of market need.
A study done by SEM Rush, a search engine optimization company, found that there was a 0.91 correlation between Bitcoin price and Google searches for “bitcoin prices” during the volatile 2017 Bitcoin bull. This is exactly what one would expect.
It is impossible to predict what will happen next. The new confluence will test the fundamental Bitcoin thesis as an inflation hedge, macro hedge, safe store-of-value, safe investment, and a way for investors to diversify their portfolios through asset class diversification.
Marla Brooks – Financial Analysis
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