Goldman Sachs analysts warn of a deep dive in the S&P 500 and other U.S. indices this week, a move that may erase some or all of Friday’s gains. That warning suggests the crypto market may be vulnerable, as Bitcoin and altcoins often decline when stocks fall.
Goldman Sachs Warns on S&P 500 Index
Goldman Sachs noted that the blue-chip S&P 500 Index had reached a key level that prompted Commodity Trading Advisors (CTAs) to sell equities. It expects these strategies to remain, net sellers this week, exiting positions worth about $33 billion. Worse, if the S&P 500 Index moves below $6,707, it may trigger sales worth over $80 billion.
Stock market volatility will remain elevated as many S&P 500 Index constituents continue to face thin liquidity and short gamma. Goldman Sachs analysts noted that the top-of-book liquidity has slumped to $4.1 million from the daily average of $13.7 million.
The S&P 500 Index will also react to earnings by some of the biggest companies in the US. While big banks and Magnificent 7 companies have released their numbers. Hundreds of companies, including Coca-Cola, Apollo Global, Cisco, Applied Materials, and T-Mobile, will report their results.
READ MORE: XRP Price Risks Steep Crash Despite Rising ETF Inflows and Utility Growth
This Warning May Impact the Crypto Market
Goldman’s warning about the stock market will likely have a significant impact on cryptocurrencies due to their strong correlation.
A good example of this is what happened last Friday when Bitcoin and other altcoins rebounded as the stock market rallied. Bitcoin price jumped from a low of $60,000 on Friday and moved to $70,000 as the S&P 500 and Dow Jones soared.
Like the stock market, it is experiencing low liquidity, with volume and futures open interest declining. Data compiled by CoinGlass shows that the futures open interest has plunged from last year’s high of over $255 billion to $98 billion today.
Also, as we warned on Saturday, there is a likelihood that the recent crypto rebound is a dead-cat bounce, a situation where an asset in a freefall rebounds briefly and then resumes the downtrend. Additionally, Bitcoin and most altcoins remain below all moving averages and the Supertrend indicator, suggesting the sell-off may not be over.
READ MORE: Tom Lee Makes the Case for BMNR Stock as BitMine Shares Implode
