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Bitcoin Crash Could Drag down Stock Prices: Wells Fargo Executive

Francisco Memoria
Last Updated March 4, 2021 5:03 PM

While speaking on CNBC’s “Trading Nation,”  Wells Fargo Securities head of equity strategy Christopher Harvey stated that he’s paying close attention to what’s going on in the cryptocurrency markets, which many believe to be one of the “most epic bubbles of all time.” Per Harvey, a crash on Bitcoin’s end could drag down stock prices.

On Christmas Eve, December 24, we saw the price of leading cryptocurrencies fall by large margins, with a few exceptions among the top 100. The cryptocurrency market has been recovering since, to roughly $14,000 on Christmas, to $15,140 at press time, according to CCN.com’s price index.

This year the cryptocurrency’s price hit an all-time high of nearly $20,000, and its volatility and the possibility of a bubble seemingly worry Harvey, as according to him “there is a significant amount of froth in the crypto markets. We do think that if that froth comes out, it will start to spillover.”

Per the executive, the froth could bring down the stock market as well, he added:

“What we’re worried about is froth coming out of that market, and that’s starting to affect equities. You’re seeing it a little bit, but just not to a large degree. And, it’s something to watch out for in 2018.”

Harvey sees the S&P 500 Index reach 2863 by the end of 2018, far below the 20 percent gains Wall Street has seen this year. His position comes from “a lot of good news already priced in,” and not seeing it go a lot further from this point. He predicts the market will face new challenges in the second half of 2018, whether the cryptocurrency market crashes or not.

Per Harvey:

“What the market will have to contend with is EPS [earnings per share] peaking, ISM potentially peaking, you’re going to have the yield-curve in all likelihood flattening — and in addition to that, you’ll likely have multiples start to compress. You’re going to have to scratch and claw to stay afloat for it to break even.”

As recently covered by CCN.com, the hype around bitcoin and other cryptocurrencies is turning many consumers – particularly the younger ones – into investors chasing the market’s returns. This would, in turn, lead to the assumption that bitcoin is decreasing the stock market’s inflows. However, legendary investor Laszlo Birinyi says he’s observing the opposite: the cryptocurrency hype is luring new investors into stocks.

According to the legendary investor, the entire market is reaping benefits from the cryptocurrency craze. He stated:

“Bitcoin is a catalyst for a lot of interest. It’s everybody. It’s also giving the guy on the trading desk, sitting at a hedge fund, a shot in the arm.”

Featured image from Shutterstock.