Bitcoin
Bitcoin’s Recent Weakness Signals an Impending S&P 500 Correction, According to Stifel
Bitcoin’s recent weakness could be signaling an upcoming correction in stocks, according to Stifel chief equity analyst Barry Bannister. Bitcoin reached its all-time high of $73,797.68 on March 14, before quickly correcting, and has struggled to maintain the $70,000 mark since then, barring a few spikes. On Thursday, the S&P 500 briefly touched 5,500 for the first time after reaching its most recent record close earlier in the week. Historically, the S&P 500 average remains stable for about six months after bitcoin peaks, and previous cycles point to a rally in the benchmark stock index, Bannister said in a note on Wednesday. “The weakening of bitcoin… signals an imminent S&P 500 summer correction and a consolidation phase,” he said. “With the S&P 500 now at the upper bound (2 sigma) of Bitcoin’s post-peak cycle overlaps since 2011, we have yet another strong signal that an imminent S&P 500 correction is possible.” .SPX BTC.CM = YTD line S&P 500 vs. bitcoin (BTC) year to date. He added that high-beta technology stocks like Nvidia are especially vulnerable in the third quarter. The S&P 500 could fall to 4,750, a drop of about 13% from current levels, by the end of the summer, he told CNBC’s “Closing Bell Overtime” earlier this week. Many see bitcoin as “digital gold,” but Bannister said he sees it as a speculative instrument driven by excess dollar liquidity. As such, it has always been sensitive to the pacifist pivots of the Federal Reserve. In 2020, it became closely correlated with the Nasdaq 100 as the central bank injected billions of dollars in bailout money into the economy during the Covid-19 crisis. Currently, the market is in an asset bubble, now that “corona money” has migrated from consumers to companies. “The elimination of that liquidity has only just begun (and may never be achieved), but since that eviction we have seen politically destabilizing sequential bubbles that have first inflated consumer prices and now asset prices,” Bannister said. However, expectations for a summer correction are not just based on Bitcoin. Stifel said he expects “a case of moderate stagflation” – a combination of high inflation, high unemployment and stagnant demand – to strengthen financial conditions and expose the S&P’s high price-to-earnings ratio. Bannister also said investors may be in a “complete bubble/mania mode that ignores our concerns.” “Timing is everything,” he wrote. “Previous bubbles dating back to the 19th century indicate that the S&P 500 could very well rise to ~6,000 by year-end 2024 and then back and forth to near where 2024 began five quarters later in ~1Q26 (S&P 500 ~ 4,800).”