Bitcoin’s 10% sell-off since June 7 sends a wake-up call to the stock market as a whole, according to Stifel strategist Barry Bannister.
In a note on Wednesday, Bannister noted the strong correlation between Bitcoin and the Nasdaq hundred since 2020, as crypto stocks are characterized more as a risky speculative asset than “digital gold. “
But while Bitcoin traded lower in June at around $65,000, the broader stock market continues to hit new records, thanks to gains from large-cap tech stocks like Nvidia and Apple.
Bitcoin’s failure to reach new all-time highs suggests that the stock market will most likely catch up as it is about to fall in line with the cryptocurrency, according to the note.
“Recently, Bitcoin’s weakening signals an imminent summer correction and consolidation in the S.
Bannister is the only Wall Street analyst to take inspiration from Bitcoin for the stock markets.
Fairlead Strategies founder Katie Stockton told CNBC on Monday that she is tracking the growing divergence between U. S. tech stocks and Bitcoin.
“When we see Bitcoin pulling back in this environment and the Nasdaq hundred is just going up, we’re concerned to some extent, just in the short term,” Stockton said. “We think this divergence is something that will likely hit the Nasdaq Index as soon as other people say ‘well, wait a second, Nvidia would possibly be too busy here. ‘
Bannister’s confidence in an impending stock market sell-off is compounded by the Federal Reserve, which could simply keep interest rates high for longer to fight persistently high inflation.
“The correction we expect in risk assets is reinforced by our view that the Fed would abandon its accommodative and cautious stance as inflation continues to rise (last-mile issues), exposing the S
In a summer correction scenario, Bannister believes that high-flying tech stocks like Nvidia will be hit the hardest, while analysts’ estimates of future earnings show signs of a spike.
“As NVDA moves beyond cycles, the emerging leader could simply lead the downside correction in 3Q24,” Bannister said.
But Bannister admitted he would likely preempt his call for a market correction, as bubbles march to the beat of their own drum.
It’s conceivable that the stock will continue to rise before experiencing an even more painful drop of around 20%.
“Past bubbles since the century imply that the S
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