Three reasons why Bitcoin is on its way to a turbulent week

Bitcoin investors may also need to ‘tighten their belts’ on what is to happen in the crypto space.

The road here may become more turbulent after Bitcoin registered its third consecutive weekly session in the red.

The cryptocurrency started the new week in negative territory, falling 0.32 percent during early trading on Monday.

So Bitcoin seems to have run parallel to Wall Street. Cryptocurrency movements last week coincided with those of the S&P 500. The 

S&P 500 closed 2.86% down on Friday, while futures hinted at the continuation of the dominant downward trend after opening this Monday in New York.

The crash came after the US Federal Reserve decided to limit the repurchase of shares and dividends from the country’s largest banks. The S&P 500 also fell as COVID-19 cases rose in Texas and Florida, stifling investors’ appetite for risk – and turning them to money security.

The possibility of a decline in the S&P 500 is still there, which means that the situation with Bitcoin is similar. With this in mind, there are at least three potential factors that could increase the volatility of the cryptocurrency market.

I – US Jobs Report

Traders and investors are awaiting the release of the US Department of Labor’s monthly employment report on Thursday. Data from last month showed a decline of 2.5 million unemployment applications. The news pushed the price of the S&P 500 up, with Bitcoin following the index.

Analysts expect the US economy to add another 3 million jobs in June. If true, unemployment will fall from 13.3 to 12 percent. This in turn would allow the S&P 500 and Bitcoin to move higher.

However, the optimistic forecast seems modest compared to the 30 million applications for unemployment. RPL Detrick of LPL Financial said on Friday that it could take years for the US economy to regain lost jobs. He recalled that recessions usually take an average of 30 months to normalize unemployment data.

Meanwhile, the growing number of COVID-19 infections may prevent investors from making big bets even after an optimistic employment report. This may limit to some extent the attempts at upward movements of the S&P 500 and Bitcoin.

II – Portfolio rebalancing

Market observers predict that investors could shift billions of dollars into stocks and bonds in their portfolios. In general, more capital will leave the stock market and go into bonds. Brian Price, head of investment for the Commonwealth financial network, told MarketWatch:

“Given the significant rally in global stock markets we saw in the second quarter, it is natural to believe that there will be some shift from stocks to bonds at the end of the quarter.”

A separate CNBC report states that the rebalancing of pension funds from quarter to quarter could vary between $ 35 billion and $ 76 billion. This move could prolong the correction in the S&P 500, and Bitcoin should track such a move.

# 3 Technical factor

The S&P 500 closed below its long-term moving average on Friday (set by a 200-day MA in the orange wave). With fundamentals showing conflicting biases, traders can accept 200-DMA as support. This should be followed by a small withdrawal followed by consolidation.

At best, such a scenario would put Bitcoin above $ 9,000 – a level it has tested many times as its support since May 2020. Therefore, a small retreat in the S&P 500 may prompt Bitcoin to test $ 9,300 again. Conversely, if the index falls further below its 200-DMA, Bitcoin could fall to $ 8,600.