It seems like a lifetime ago that the Bitcoin price grazed the $20,000 mark in late 2017, and bulls have been pining for a new breakneck rally ever since. According to Fundstart Global Advisors co-founder Tom Lee, the catalyst for BTC’s march to a new all-time high could come from an unlikely place: the stock market.
Lee theorizes that an interesting correlation has formed between the flagship cryptocurrency and equities. To illustrate that, he speculates that Bitcoin may actually become a “risk-on” asset once equities break into new territory.
Taking the large-cap S&P 500 index as a proxy for this idea, Lee told CNBC:
“In fact, we published a piece today showing our clients that if you look at the last ten years and take the three or four best years of the S&P, they’ve all co-incided with the best years for Bitcoin.”
Bitcoin and stock market indices like the S&P 500 have traded largely sideways in recent months giving investors pause to consider what will likely catalyze markets for further upside.
“Well you know I think that there have been tailwinds building for Bitcoin. One has been institutional money potentially coming in through things like Bakkt and programs like Libra and the technicals have been better. But I think Bitcoin has kinda stalled recently because the macro outlook has stalled.”
Lee pointed to a number of bullish fundamental and technical factors buoying Bitcoin right now but suggested that equities may need to take the lead on this one.
His base-case rally is 125 points for the S&P 500, which would take the index to an all-time high of roughly 3,125 by the end of the year (the S&P 500 closed at 3,007.39 on Friday).
As delectable as that sounds, markets may have to wait it out. Saudi Arabia suffered a major attack to its oil production over the weekend, which could trigger stock market volatility in the coming weeks.
However, it’s difficult to predict the impact that geopolitical events play on Bitcoin’s price. Even Fundstrat’s “misery index” leaves few clues as to which path the king of crypto will take next.
The S&P 500 raced to new all-time highs earlier this year, only to be beaten back down four short weeks later. Bitcoin, on the other hand, is still down nearly 50% from its all-time highs at more than $19,500 a coin.
Admittedly, much of that variance boils down to Bitcoin’s heightened volatility, which Lee suggests may attract yield-hungry investors into the crypto market.
Year to date, Bitcoin has handsomely outperformed the S&P 500.
So far, Bitcoin’s narrative has centered around the idea of a global hedge in a low to negative interest rate environment thanks to questionable practices from central banks.
Add to that global geopolitical risks and you have a cocktail of risks bubbling up under the surface. Lee’s idea is a bold one that needs further validation.
Bitcoin was, after all, born out of the last financial crisis, not during it. Only when the next crisis hits will hodlers be able to verify whether Bitcoin can claim to be “ambidextrous” as Lee suggests.
Last modified: June 14, 2020 11:18 AM UTC