‘Rosy’ Earnings Estimate Hurts Bitcoin, BTC Struggles at $20K

Bitcoin continues to lose momentum in the lower timeframe as the bulls failed to keep up with yesterday’s rising impulse. may be bound to

At the time of writing, the Bitcoin price is trading at $20,000 with a 1% loss and 3% gain over the last 24 hours and 7 days respectively. Despite the negative price performance, BTC remains relatively strong when compared to other top 10 cryptocurrencies by market capitalization.

Record Correlation Between Bitcoin And Gold And Stocks In 2022

Data from Kraken Intelligence shows that Bitcoin is increasingly correlated with risk-on assets and other traditional assets in legacy financial markets. This phenomenon was common throughout 2022 as global markets moved in tandem in response to the US Federal Reserve (Fed).

The financial institution has tried to curb US dollar inflation by raising interest rates. This has had negative consequences for all asset classes.

As seen in the chart below, Bitcoin’s price has decreased in correlation with major stock indices, the Nasdaq 100 and the S&P 500. Over the past few months, this correlation has hovered below 0.5, but is approaching high correlation levels again. They are approximately 0.8 and 0.74 respectively.

Something similar is happening with gold and US Treasuries. Unlike stocks, bitcoin has been less correlated with precious metals and US Treasuries, but given the heightened economic uncertainty, bitcoin appears to be changing.

Earning Season May Limit Bitcoin’s Bullish Momentum

The data suggests that Bitcoin may be increasingly susceptible to events related to stocks and major indices. Jurrien Timmer, director of macro at investment firm Fidelity, said: I believe The upcoming earnings season could pose hurdles for traditional assets.

Timmer supports his theory of the recent rise in the US dollar as measured by the DXY Index. This tool allows market participants to understand the strength of the dollar primarily compared to the Japanese Yen, British Pound, and the Euro.

A similar disconnect can be seen in the chart below when comparing the rate of change in the dollar to the expected EPS growth rate (NTM divided by LTM). Estimates should come down sooner. /Four pic.twitter.com/G49jAMu0Y0

— Julian Timmer (@TimmerFidelity) October 6, 2022

The higher the DXY index, the weaker these other currencies, and in turn the weaker other risk-on assets such as Bitcoin. Timmer claims his 40% of S&P earnings come from abroad, which could have a noticeable negative impact on profit margins and the earnings of U.S. companies. The expert writes:

Revenue growth is expected to slow to 4% and stay there. Considering the DXY rate of change is +19%, this seems too high. So, based on dollar and market width, there could be some negative earnings surprises.