Over the past 6 months, there has been a strong correlation between bitcoin and stock indices. With the global economic situation worsening, this correlation has grown into a heavy dependence. Meanwhile, the US Federal Reserve focuses on a stronger dollar through monetary policy tightening. The correlation between the crypto market and the equity market got stronger amid the negative fundamental background. The correlation has been at 90% for 2 months.
However, in recent days, the correlation between bitcoin and the equity market has somewhat decreased. Thus, when the SPX and NDX rallied, BTC/USD remained to hover in the narrow range of $29k-$30k. Eventually, the asset broke the narrowing range upward. It all raises questions. Indeed, BTC's growth is beyond comparison with the bullish potential of stock indices. On the one hand, it can be that the correlation has decreased, harming bitcoin. On the other hand, the situation is getting worse due to higher volatility triggered by the narrowing of the $29k-$30k range.
Although the asset left this range, there is every reason to believe that it happened due to the actions of major players. This can be clearly seen on the H4 chart where the sideways move gradually went to the lower limit of the range, the lower shadow was formed, and a rebound took place.
This means that buyers were partially pushing the price down to a certain level deliberately and then unexpectedly bought out the necessary volumes to maintain the integrity of the range. Buyers increased the volume of long positions when they saw how determined market makers were. This was followed by a plunge in longs by $536 million. Nevertheless, the price still remained at $28k due to a large buy order set at this level.
Eventually, the price went above the $29k-$30k range. At the same time, volatility started to increase and the volume of long positions decreased. Anyway, the market is still willing to buy bitcoin. On May 30, the asset is unlikely to show steep growth as most institutional investors have a day off.
Despite the manipulative nature of the uptrend, the cryptocurrency is still bullish. Technical indicators on the daily chart are making bullish signals. The Relative Strength Index and the Stochastic Oscillator have approached the upper limit of the green zone, which signals an increase in bullish activity. The MACD has formed a bullish crossover and is still moving to zero. These signals confirm the positive dynamics in lower time frames. The market may well try to extend the upward move to the next Fibonacci level, that is, to the range of $33k-$35k.
A set stop-loss order can help minimize risks posed by the start of the Fed's quantitative tightening process. Fed officials don't know the effects of this process on the economy, which means that investors' actions will depend on the situation. In other words, the share of irrationally opened positions will dramatically increase. There is every reason to believe that the start of QE tightening on June 1 will have a negative effect on the stock market given that a drop in bitcoin to stock market correlation was transitory.
