Written by Marcos Sotero, Analyst The UK Digital Asset Broker GlobalBlock
Bitcoin fell further this morning to $19,000, where it is trading below the 200 simple moving average weekly. So far, Bitcoin has not retested this level as resistance, but if it did and declined again, it would be a very bearish signal. This is because it will be the first time this level has been breached on a long time frame and could signal that an extended bear market is looming.
There is a “risk off” tone in European markets this morning which has contributed to selling pressure on US stock market futures and the cryptocurrency market. Spain’s general inflation rate for June came in at 10.2% which is much higher than expected at 9% plus 8.7% in May. This contrasts with the German CPI data on a yearly basis which shows a decline from 8.7% to 8.2%, less than the 8.8% expected. Although the German reading came in lower than expected, the European Central Bank (ECB) will have to raise interest rates. This means that a recession is likely in Germany as growth is set to slow. Rising inflation in Spain, Belgium and France to its highest levels since the 1980s, led European Central Bank President Christine Lagarde to acknowledge yesterday that “low inflation is unlikely to return.” This has led to more fear about European economies in the near future.
In the United States, consumer confidence is now lower than it was during the global financial crisis (GFC) in 2008, which was shown by the University of Michigan Consumer Sentiment Index. This gives more indications of slowing growth in the US in the coming months, coinciding with rising inflation. This pertains to cryptocurrencies as the cryptocurrency correlation is heavily influenced by high inflation data (shown in the chart below that shows BTC and ETH charted along with inflation prints).
Stock prices are driven by two main aspects – future profits and multiples of what you are willing to pay for those future profits. The complications were pressured by expectations of higher interest rates, which led to the downside in equities. The recession may not be fully priced in by most investment fund analysts, many of whom have not experienced a macro environment similar to what we are currently experiencing. Hence the following months can result in lower frequency of earnings revisions. If this is the case, stocks may drop and bring in cryptocurrencies as well.
#stagnating #earnings #pain #cryptocurrencies