Tech
Bitcoin’s price spike would be a bearish signal for the big tech stock market
- According to Stifel, a spike in the price of bitcoin would be a bearish trigger for the stock market.
- The digital currency reached an all-time high of around $73,800 on March 14 and has yet to retest that level.
- “Bitcoin and the NASDAQ 100 reflect the speculative fever fueled by cheap money following the Fed’s dovish turn,” strategist Barry Bannister said.
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A spike in the price of bitcoin would be a bearish trigger for the broader stock market, according to a Wednesday note from Stifel equity strategist Barry Bannister.
Bitcoin hit an all-time high of around $73,800 on March 14 and has yet to test that level again. The world’s largest cryptocurrency traded at around $67,600 on Thursday.
Bannister argued that bitcoin’s recent rise coincides with a dovish stance from the Federal Reserve, but such a connection could signal the end of the current bull run.
“Bitcoin and the NASDAQ 100 reflect the speculative fever fueled by cheap money after dovish Fed turns, such as those that occurred in the fourth quarter of 2023. We show that if Bitcoin reflects euphoria after an accommodative Fed, it is noteworthy that Bitcoin (and fever) could peak,” Bannister said.
Bannister pointed to a bitcoin log chart with a polynomial trend applied, which shows that bitcoin “appears to be maturing with major price spikes” around the $73,000 level.
Stifel
And if bitcoin does indeed peak, the implications would be negative for the broader stock market, especially mega-cap tech stocks Nasdaq100 in the next six months, according to Bannister.
A bitcoin spike means “weaker” mega-cap tech stocks, a likely decline in investor sentiment, and the S&P500 would underperform the equal-weighted S&P 500 Index over the next six months. This causes value stocks to finally start to outperform growth stocks, according to the note.
The big catalyst for a decline in risky assets would be a reversal by the Fed from the end of last year. This could be triggered by strong economic growth or clear signs that inflation is still rising. In other words, the Fed linchpin that has helped boost stocks and cryptocurrencies so far this year may be all bark and no bite.
“With no clear signals supporting the Fed’s bullish move in Q4’23, the market may have adopted a political interpretation. While we doubt the Fed’s pivot was political, it’s investor perception that matters most, and Using this logic we show that even recent polling differentials support a pullback for the major stock indexes,” Bannister said.
Stifel