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The quarterly results of the important retail chains Walmart and Target, which showed lower profits than expected, accentuated fears in the market this week about the impact of inflation on the economy. On Wednesday, that uncertainty was strongly reflected not only in the department store sector, but also spread downward pressure to the shares of other sectors of the economy, including the bitcoin and cryptocurrency markets.
The first warning bell rang with Walmart’s quarterly financial results, on Tuesday, May 17, in which it was evident a significant decline in profits, according to the financial publication Seeking Alpha. Despite an increase in sales in the quarter, the fact that the expected earnings per share (EPS) were not achieved, led to a fall in Waltmart’s stock of 11% last Tuesday, which has continued until this Thursday 19.
On Wednesday, the publication of Target’s results confirmed the trend of consumers to concentrate more their expenses on food, as well as reduce the consumption of products such as televisions and bicycles. Both Target’s sales and profit were lower than estimated. The impact of the profit reduction was even greater than in the case of Walmart, as Target shares fell 25% on Wednesday.
The following table, taken from the newsletter of Bloomberg Online, summarizes the losses of the main stock indexes on Wednesday, and includes other items such as oil and bitcoin.
As can be seen in the table, the Nasdaq, led by major technology companies like Apple, Alphabet (Google), Amazon and Intel, among others, resulted in the greatest losses on Wednesday, 4,73%; followed by S&P 500 and Dow Jones. The price of bitcoin, which also retreated on Wednesday, due to its high correlation with stocks, suffered a loss of 2.94%.
This is a little more than half of the loss reflected in the Nasdaq index, which sets a new precedent in the behavior that cryptocurrency has had lately in relation to risky assets. So far, bitcoin’s price declines had been steeper than in stocks.
In the following graph it can be seen that a coupling of the bitcoin price is maintained (top panel) with the Nasdaq (orange) and S& P 500 indices (light blue). The price of bitcoin has recovered in the last few hours and at the time of writing this article it is trading at USD 30.095. In the last 7 days, bitcoin has appreciated 14%, while Nasdaq, has increased only 1%. The S&P 500 index lost 0.11% in the same period.
According to the proximity of the spot price of bitcoin with its realized price, the analyst firm Glassnode points out in its recent Week-on-Chain report, that the accumulation is occurring again by traders who consider that bitcoin could be undervalued and the price would rise in the long term.
However, economist and analyst Harry Dent, points out that we would be at the beginning of a prolonged bearish period, in statements commented by Criptonews. Bitcoin could fall to $3,000, before starting a bullish breakout that takes you up to a quote of USD 500,000, Dent argues.
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