The growth of 6 of the 7 Magnificent 7 tech companies—Apple, Microsoft, Alphabet, Amazon, Meta Platforms, and Tesla—has reportedly declined as Bitcoin attempts recovery. These tech stocks have collectively lost $2.3 trillion in market value over three weeks, raising fears of recovery for Bitcoin.
The deceleration could impact Bitcoin due to its positive correlation with the S&P 500. Despite BTC briefly falling under $50,000 last week due to equity market turmoil, the impact of the Magnificent 7 might be limited.
The growth rate of Magnificent 7 has fallen
Market commentary by The Kobeissi Letter finds that the Magnificent 7 tech companies lost around $2.3 trillion in three weeks. In addition, their growth rate is reportedly falling.
In the second quarter of 2024, the combined profits of Apple, Microsoft, Alphabet, Amazon, Meta Platforms, and Tesla (excluding Nvidia) grew by 30% compared to the same time last year. The growth is slower than the 51% rise in Q1 2024 and 57% growth in Q4 2023. Estimates cited by the report pin future growth at around 17% in Q3 2024.
The slowdown in growth could have an impact on Bitcoin, which is still bouncing back from its last week’s brief drop below $50k. In the early hours of August 12, BTC is trying to break above $60k again.
Tech stocks could weigh on Bitcoin price
Some analysts predict that the weakness in top tech stocks could weigh on Bitcoin’s price due to its correlation, especially when Bitcoin’s market turmoil and price recovery coincided with the global equities market since the August 5 sell-off.
However, The Block’s BTC Pearson Correlation with the S&P 500 for the last 30 days stands at 0.28. As of June, the Magnificent 7 dominated close to 32% of the index weight. This means that Bitcoin’s current relation with Magnificent 7 stocks is positive, but the correlation is weak. That means that the two essentially move in the same direction, but not strongly.
BTC equity indices and gold correlation | Image: The Block
At the start of August, the relationship was negative, meaning that if the tech stocks’ value took a hit, the Bitcoin price would rise. In June, the relationship was a strong positive before flipping. However, Bitcoin is also in the middle of a presumed bull run after its April halving. According to Rekt Capital, BTC will revisit the range of $65,000 over time.
With BTC’s post-halving cycle in play, crypto analyst PlanB says Bitcoin has entered a bull phase earlier than usual. The analyst opines that the early bull run could mean that markets were not ready and investors should have been accumulating.
The issue with current bitcoin market IMO: it went into bull market too early. Normally, halvings (every 210,000 blocks) are in accumulation phase, but 2024 halving (block 840,000) is in bull market phase. So we have been front-running, but the market was not ready to go up yet. pic.twitter.com/TYC2aswGIC
— PlanB (@100trillionUSD) August 9, 2024
Therefore, the performance of the Magnificent 7 will weigh on the price of BTC based on its positive correlation, but the impact is expected to be limited. Meanwhile, other factors, like Bitcoin’s market cycle trajectory, play a major role in its performance.
