Will weakness in Magnificent 7 stocks spread to Bitcoin price?

The mega-cap tech stocks, which saw a robust start in 2023, are now coming to grips with massive trillion-dollar losses, leaving their shareholders concerned. Wall Streets anxiousness over surging bond yields and greater rates of interest has actually cast a shadow on these companies. Traders are now contemplating the possible effect on Bitcoin (BTC) if the S&P 500 downtrend continues.Consequently, financiers must investigate the correlation in between Bitcoin and the S&P 500 and consider whether cryptocurrencies can prosper in an environment of high-interest rates.Bloomberg Magnificent 7 index vs. S&P 500 equivalent weight index. Source: BloombergThe 7 biggest tech companies, consisting of Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla, jointly make up a staggering 29% of the S&P 500, marking the greatest concentration ever tape-recorded in this stock exchange index. Given that the end of July, these tech giants have seen a significant erosion in their market worth, with a staggering $1.2 trillion loss.Real Moneys James DePorre notes that “73% of stocks in the market are more than 20% below their highs,” which technically defines a bear market. This underscores growing worries in the more comprehensive economy apart from the top-7 stocks.In its endeavor to regain credibility in combating inflation, the Federal Reserve has actually indicated its intention to keep higher interest rates for a prolonged period. Crescat Capital alerts that a considerable decrease in the S&P 500, paired with a widening of corporate credit spreads, could elevate the probability of an economic downturn.Higher rates of interest impact stocks and commoditiesCrescat Capital has also raised concerns about the wave of sovereign and business financial obligation developing in 2024, which will require refinancing at significantly higher interest rates. They suggest direct exposure to commodities due to their historic durability during inflationary periods, intensified by the difficulty dealt with by commodity manufacturers in buying fixed assets.Despite the huge difference in market capitalization, amounting to $10.5 trillion for Apple, Microsoft, Google, Meta, Nvidia, and Tesla, compared to cryptocurrencies (leaving out stablecoins), which fail by over 9 times, there are some intriguing parallels.First, both markets show a shortage quality that associates with the financial base. In essence, both react similarly to the actions of the U.S. Federal Reserve, where increased blood circulation benefits scarce properties, while a restrictive policy with high rate of interest favors fixed-income investments.Additionally, the pattern towards digitalization has actually transformed the way people use apps and mobile services, particularly in financial services. Provided the limited versatility of standard companies, frequently due to regulative restraints, its not surprising that the public is welcoming cryptocurrencies, even in the kind of stablecoins. The growing demand for totally digital services is a secular pattern that positively affects both the crypto and tech sectors.Decoupling of the S&P 500 and cryptocurrenciesThe efficiency of the top seven S&P 500 stocks can decouple from cryptocurrencies despite the time frame. Currently, Bitcoin is trading around 50% below its all-time high, while Apple and Microsoft are down 13% and 7% from their peaks, respectively. This inconsistency is partly due to investor concerns about a looming recession or a choice for companies with substantial reserves, whereas cryptocurrencies, leaving out stablecoins, do not have capital or earnings.Historical 30-day correlation in between Bitcoin/USD and S&P 500 futures. Source: TradingViewFrom a financial investment viewpoint, cryptocurrencies and stocks inhabit different worlds, but this contrast highlights how Bitcoin can grow separately of retail adoption and spot exchange-traded funds (ETFs), as evident by Microstrategys $5.4 billion direct financial investment in the cryptocurrency.Related: Sodl prematurely: United States govt missed Bitcoin gains now total $6BThe leading seven tech business hold a combined $596 billion in money and equivalents, enough to purchase the entire distributing supply of Bitcoin, assuming 3.7 million coins are lost permanently. Moreover, these companies are forecasted to generate $650 billion in earnings within the next 5 years. Even if those companies continue to decrease, their cash position could ultimately shift to products consisting of Bitcoin.Meanwhile, the U.S. real estate market, another pinnacle of savings for the economy, is facing issues of its own due to record high home mortgage rates. Sales of formerly owned homes in September dropped to the slowest pace because October 2010, according to the National Association of Realtors.Ultimately, a recession in the S&P 500, whether driven by mega-cap tech stocks or other elements, may not necessarily spell doom for cryptocurrencies. Investors frequently look for diversification to reduce threat, and Bitcoins low correlation with conventional markets, together with early indications of problem in the property sector, provides an appealing condition for alternative hedges, as signaled by legendary financier Stanley Druckenmiller.This post is for basic information purposes and is not intended to be and must not be taken as legal or investment suggestions. The thoughts, opinions, and views expressed here are the authors alone and do not necessarily show or represent the views and opinions of Cointelegraph.

Traders are now contemplating the potential impact on Bitcoin (BTC) if the S&P 500 downtrend continues.Consequently, financiers must investigate the connection between Bitcoin and the S&P 500 and consider whether cryptocurrencies can grow in an environment of high-interest rates.Bloomberg Magnificent 7 index vs. S&P 500 equal weight index. Source: BloombergThe seven biggest tech companies, including Apple, Microsoft, Alphabet, Amazon, Nvidia, Meta and Tesla, collectively constitute a shocking 29% of the S&P 500, marking the highest concentration ever tape-recorded in this stock market index. The growing demand for fully digital services is a secular pattern that positively affects both the crypto and tech sectors.Decoupling of the S&P 500 and cryptocurrenciesThe performance of the leading seven S&P 500 stocks can decouple from cryptocurrencies regardless of the time frame.