Bitcoin to the Moon? Let the S&P get there first.
Bitcoin markets are unpredictable, to say the least. One moment you could be stacking your SATs up to the heavens in anticipation of a bull run, and in the next you could be spending it on takeaway pizza. You never know how and where the markets are going to move, or do you?
Bitcoin began the year at $3,400, topped out at $13,800, traded between the $9,500 – $10,500 range for months and now, is perched below $8,000. Even with the king coin losing over 24 percent of its value in two weeks, some are expecting a price shock come the end of the year, and even a break over its all-time high of $19,800.
However, this bullish optimism is not one set in fundamental chart analysis or technical network achievements; its primed [for the most part] on the movement of the S&P 500, the most important stock exchange in the world. According to Bitcoin bull and stock expert Tom Lee, Head of Research at Fundstrat, Bitcoin is more akin to the stock market than one would think.
In a recent interview with CryptoTrader at the Korea Blockchain Week, Lee made some bold conclusions, even hinting at a BTC breakout over its December 2017 ATH. To be prepared for the breakout, all you have to pay attention to is the S&P 500.
On 30 July, Fundstrat issued a note to its clients, stating that the “Bitcoin Misery Index,” an index that tracks market sentiment had begun to “breakdown.” Lee estimated that this “breakdown” would peak, or rather bottom, in 8 weeks, which is “just about now.”
Key indicators aplenty for Bitcoin, but on a larger-scale, the most important will be macroeconomic factors.
“As long as macro is trendless, which means, you know, S&P is been stuck in a range. I don’t think that’s good for Bitcoin.”
Lee, veering clear of calling this the “bottom” for Bitcoin, stated unequivocally that Bitcoin is “trendless” until and unless there is a “breakout” of the stock market, manifested by S&P movement.
The link between the traditional stock market and the top cryptocurrency’s price movement has been an unpopular, but seemingly trending opinion, especially during period of highs and lows. eToro’s Senior Markets Analyst Mati Greeenspan noted that the Bitcoin collapse post the Bakkt launch failure [on 23 September] was similar to the SPX drop during the same period. Calling it a “strange coincidence,” he tweeted,
Plunge in the US stock market (orange line) proceeded the bitcoin breakout (blue).
I know it's an uncorrelated asset but this is a really strange coincidence. 🧐 pic.twitter.com/ICpM0W7esH
— Mati Greenspan (@MatiGreenspan) September 25, 2019
Bitcoin has “always been” linked to the S&P, stated Lee, highlighting that the most successful years for the S&P 500 with over 15 percent returns have been the “best years” for Bitcoin, achieving a whopping 1300 percent.
With the S&P slumping earlier in the year during the peak of the US-China trade war, there was speculation of Bitcoin performing as a hedge against the political and economic uncertainty prevailing in the larger world. Inkling of this resistance was seen in the Argentinian and Hong Kong market, during their respectives phases or turmoil.
However, Lee stated that the ‘hedge argument’ might not hold in the face of the S&P movement,
“Believe it or not, Bitcoin has moved in tandem with the S&P since its inception. It’s not really operating as a hedge today.”
The evidence of Bitcoin not being a ‘hedge’ can be traced back to the ownership of the cryptocurrency. Bitcoin is being seen less as the currency of the future, free from government control and one based on logic. Instead, its been seen as a manifestation of its price fluctuation.
“People are overestimating the size of Bitcoin ownership,” said Lee, adding that the retail market is quite small and their attraction to the cryptocurrency is as a “source of volatility and risk-on,” rather than a political hedge against the world. In that view, Bitcoin is currently operating as a “high volatility equity,” but eventually it will act as a “macro-hedge.”
While the market’s in a slump, Bakkt’s volume is bleak, and the Bitcoin ETF is likely to be rejected yet again, Bitcoin is looking weak, but it could get a boost from the S&P. On asked if the Bitcoin bull expected a bull run towards the close of 2019, Lee concluded,
“If the S&P breaks out the way we think it should, it will finally allow Bitcoin to break all-time-highs.”