- According to Stifel, a peak in Bitcoin prices can trigger a bearish stock market.
- The digital currency hit an all-time high of about $73,800 on March 14, but has yet to retest that level.
- “Bitcoin and the Nasdaq 100 reflect the speculative fever fueled by cheap money in the wake of the Fed's dovish policy shift,” said strategist Barry Bannister.
A peak in Bitcoin prices will be a bearish trigger for the overall stock market, according to a note from Stifel equity strategist Barry Bannister on Wednesday.
Bitcoin hit an all-time high of around $73,800 on March 14, but has yet to retest that level. The world's largest cryptocurrency traded at around $67,600 on Thursday.
Bannister argued that while Bitcoin's recent rally coincides with the Federal Reserve's dovish turn, that connection could signal the end of the current bull market.
“Bitcoin and the Nasdaq 100 reflect the speculative fever fueled by cheap money following a dovish Fed policy change like the one that occurred in Q4 2023. “It's worth noting that Bitcoin (and its fever) may have peaked if it reflects the euphoria that followed,” Bannister said.
Bannister pointed to Bitcoin's logarithmic chart, which applies a polynomial trend, and shows that Bitcoin “appears to be maturing with a major price peak” around the $73,000 level.
Stifel
If Bitcoin does indeed peak, the impact would be negative for the broader stock market, particularly large-cap tech stocks and the Nasdaq 100, over the next six months, Bannister said.
Bitcoin's peak means 'weakness' for mega-cap tech stocks, likely to weaken investor sentiment, with S&P 500 set to underperform equal-weighted S&P 500 over next six months It will be. According to the paper, value stocks will finally start outperforming growth stocks.
The major trigger for the decline in risk assets is likely the reversal of the Federal Reserve's dovish policy since the end of last year. That could be caused by strong economic growth or clear signs that inflation is still rising. In other words, the Fed's pillars that have helped push up stock prices and cryptocurrencies so far this year may be completely dead on.
“In the absence of clear signals supporting a bullish Fed turn in the fourth quarter of 2023, the market may have adopted a political interpretation. I doubt the Fed's change of direction was political, but more importantly “That's investor perception, and using that logic, we can see that the recent polling gap also supports a decline in the major stock indexes,” Bannister said.
Stifel
