On Thursday, the cryptocurrency and stocks markets were a sea of red as the US earnings season continued and the recent rally faded. The SPDR S&P 500 (SPY), SPDR Dow Jones ETF (DIA), and Invesco QQQ (QQQ) dropped by over 1%.
The stock market’s performance also continued in the cryptocurrency market. Bitcoin dropped to $63,000 after rising to $65,000 earlier this week. This performance affected spot Bitcoin ETFs like IBIT, FBTC, and ARKB.
Other cryptocurrencies also dived sharply, with Worldcoin (WLD), Ripple (XRP), Shiba Inu (SHIB), and Gala leading the losses.
These declines happened even as American companies like Netflix and Goldman Sachs published strong financial results. Also, there is rising optimism that the Federal Reserve will start to cut interest rates in the coming months, a potentially bullish catalyst.
Analysts had different explanations for the drop. In a note, an analyst at Evercore ISI warned that the equity market would see more weaknesses ahead, a move that could also affect Bitcoin and its ETFs. He said that there was more room for:
“tactical downside in the weeks to come as we enter the gauntlet of the weakest two months and only consecutive losing months for equities, with markets at all-time highs.”
In a separate note, Keith Buchanan, an analyst at Globalt Investment, noted that the ongoing retreat is part of profit-taking among investors since these assets have done well recently. He said:
Further, there are increased concerns about the US presidential election cycle after Donald Trump shared his vision for a second term.
Semiconductor stocks like TSMC and Nvidia plunged after Trump warned Taiwan to pay for defence. Trump has also threatened to impose more tariffs on imported goods.
Joe Biden has also threatened companies like Tokyo Electron and ASML for selling their products to Chinese firms. In a note, Matt Maley of Miller Tabak said:
“This news on the chip front is the kind of UFO (UnForeseen Occurrence) that could indeed create the kind of selling that could be the catalyst for a tradable correction in the stock market.”
Bitcoin ETFs also dropped as the recent rebound faced strong resistance at $65,000, a sign of waning demand.
