Crypto analyst Justin Bennett is issuing a warning on Bitcoin (BTC) as the flagship crypto asset has been experiencing double-digit gains over the past week.
Bennett points out that based on the historical correlation between BTC and stocks, Bitcoin could correct by 54% from its current level. He highlights that a steep stock market correction could trigger a Bitcoin collapse, similar to what happened in February and March of 2020 when the S&P 500 stock index plunged by 25%. During that period, Bitcoin fell by around 50%.
Bennett foresees the S&P 500 index falling to around 3,255 points, which is a support level that was previously a resistance level in 2020 before converting to a support level in 2021. This level also aligns with the index's long-term ascending trend line, according to Bennett's chart.
While it is impossible to know for sure, Bennett suggests that a 23% correction from the S&P 500 could have a similar effect on Bitcoin as the previous 25% correction. He emphasizes that correlations between equities and Bitcoin can change over time.
In conclusion, Bennett warns that if equities experience a significant downturn, it is only a matter of time before crypto follows. Investors should be cautious and consider the potential risks before making any high-risk investments in Bitcoin or other cryptocurrencies.
