Bitcoin a leading indicator for stocks?
According to Morgan Stanley, Bitcoin has been a fairly accurate leading indicator for stocks.
At least over the past couple months.
Before that, there was literally almost no correlation between the two.
However, if you want to know where the stock market goes next, watch Bitcoin says Michael Williams of Morgan Stanley.
What is Morgan Stanley saying exactly?
According to Morgan Stanley Bitcoin has been leading the stock market over the past two months.
"We continue to think the price of bitcoin is worth watching as another signal of animal spirits."
“Remarkably, since the peak in P/Es and bitcoin on the exact same day, December 18th, they have traded very closely together."
Check out the chart of that below:
(Source: https://finance.yahoo.com/news/want-know-stocks-go-next-watch-bitcoin-142204335.html)
Though they think this current correlation may not last for the longer term, it seems here to stay for the time being:
“While we do not expect this relationship to continue to hold so tightly we do think it will be hard for P/Es to move significantly higher or lower without a commensurate move in the digital currency.”
This likely also has something to do with easy money policies not being quite so easy anymore.
When interest rates were low, money was looking for alternative investments in order to earn some kind of a return.
In that kind of environment, assets deemed as "risky" tend to get bid up.
Now that interest rates are going up, and are being signaled to go up several more times this year, some money will be looking more towards traditional investments in order to see a return.
That doesn't mean that bitcoin can't go up in a tightening monetary environment, but it does mean there likely won't be as much froth in the rest of the cryptocurrency markets.
More about the report form Morgan Stanley can be found here:
https://finance.yahoo.com/news/want-know-stocks-go-next-watch-bitcoin-142204335.html
Stay informed my friends.
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A lot of analysts haven't picked up on this yet, but I'm starting to entertain the possibility that student loan cash being deployed in the crypto market, may have played a much larger role in the bubble than anyone realizes.
I read a little about that as well, but the total dollar amount of student loan money that was likely allocated to cryptocurrencies was likely too small to have had much of an impact, at least according to what I have read.
Interesting. I understand many loaded up their credit cards buying when prices were above $15K...thinking it would keep going up and up and up forever.
I think you're right about easy money entering risky assets. With credit cards taken away from crypto and interest rates going up, there won't be as much "easy" money pumping into crypto. With all the volatility in the stock market, I think it's wise to allocate money towards crypto. Every American can afford to allocate 1%-5% of their net worth into crypto.
It only started being correlated with stocks in 2017. In the bear market of 2014-2015, bitcoin was going down while stocks were marching upwards.
I've read some differing opinions about BitCoin being a "leading indicator" for the stock market. If there is some correllation between the two, I think it is a loose relationship, at best.
Cryptos are still very new and very small, compared to stock markets. Much more volatile and just a different game in several ways. Maybe "the jury is still out" and we'll just have to see how things play out.
It is a loose relationship for sure throughout it's overall history, but look at the chart above, there is no arguing there is some major correlation going on currently. How long that will last, no idea.
Interesting article, what baffles me is the fact that fortune 500 companies are so hell-bent on bitcoin being a bubble, when I'm damn sure most of those same companies have invested in btc themselves. Could explain the trends we are currently seeing between btc and the certain stocks, just saying.
Until we get more volume into cryptocurrencies as a whole, we can expect these kind of trends because of these giant companies secretly holding mass amounts of btc. Just my opinion here :)
They bad mouth BECAUSE they see it is a good investment. They want to buy in, but the price was too high. Therefore, a negative PR campaign was launched to drive the price down, so they could buy it up.
Hi jrcornel,
Your article made me think about how could Bitcoin lead the stockmarket.
Make sense because the same banksters that manipulated stocks for years are now manipulating the BTC so, of course make sense that this is happening.
It is no coincidence that this start to show starting 2 months ago since that is when the big Wall Street companies decided to jump on the opportunity in Crypto space....imo
Your opinion on my opinion?
I think there are no coinincidences on Wall Street. :)
Which means yes, I think they were the ones that drove prices up to $20k in December (shortly after futures and options markets were available) and then I think they have been helping drive prices currently right now.
The good news is that they are likely starting to get back in on the long side at current levels and will likely be some of the main drivers taking us back to $20k later this year.
We have to wait til later this year for BTC to reach $20k? Sooner be better. Maybe good time to buy BTC now with price around $8k?
Haha well even if it happens next year, it's not easy to double or triple your money on an investment. That being said I have no idea if it actually hits $20k this year, but many people smarter than me think it will. So, I will go along for the ride and see what happens.
Oh there's manipulation going on 100% behind closed doors with the big wigs on wall street. It sucks how early on big companies treated btc like the plague, now they secretly hold huge amounts of btc just waiting to exit with their profits while the rest of us, who actually believe in the concept of cryptos, get the short end of the staff... Oh well, I'm in btc for the long run anyways baby ;)
I disagree about the big bankster was avoiding BTC like a plague. They were purchasing BTC behind the scene and on the main media, they were putting down BTC to discourage those newbies wanting to enter BTC. Morgan Stanley, CEO was one of the liers who purchase BTC back in Novemeber 2017 when the price was going up like crazy, that night after this CEO put down BTC on the media, he bought a huge position in BTC making big profit that week.
Instead of thinking we are getting the short end of the staff, I recommend to you that we need to think like these banksters and follow what they do to make money with them since we can not fight them head on.....imo
I wish to know more about crypto currency but they are alot of scammers on that lane @hanamamna
Took the words out of my mouth. It seems like they are bragging about how they finally figured out how to effectively manipulate the price of Bitcoin...not really revealing secret statistics for the benefit of humankind.
Please explain what do mean by this statement:
"not really revealing secret statistics for the benefit of humankind."
The title and some of the wording in the article make is sound like JP Morgan is letting the world in on a little secret they discovered...that there is this corelation.
I was being sarcastic, but making a point that this is a marketing statement by JP Morgan...not a revelation of super special data that investors can use to their advantage.
The author seems to imply that this is breaking news, yet evidence suggests that these very same people are at the heart of - yet another - price manipulation scheme.
And because of the fact they:
I am assuming they are revealing that they finally figured out how to manipulate the price to their advantage.
Okay, thanks for clarification. You got your facts correctly....
The title and some of the wording in the article make is sound like JP Morgan is letting the world in on a little secret they discovered...that there is this correlation that no one else has realized until now.
I was being sarcastic, but making a point that this is a marketing statement by JP Morgan...not a revelation of super special data that investors can use to their advantage.
The author seems to imply that this is breaking news, yet evidence suggests that these very same people are at the heart of - yet another - price manipulation scheme.
And because of the fact they:
I am assuming they would not reveal this information until they finally figured out how to manipulate the price to their advantage. And then people will get used to their manipulations and not say another word about it.
yesss he is Right. I think The people short VIX and long Cryptos were 'cut from the same cloth and made from the same mold'- the two narratives converge. Bitcoin has finally some usefullness, a 'leading' indicator for stocks and risk in general...for the moment at least.
"For the moment" is key. It might not be the case as soon as tomorrow. Nice comment.
Thanks dear.
Very interesting concept, thanks for sharing. I've smashed the upvote button for you!
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Hm. Six days before the stock market reversed course, the Financial Times was wondering why interest rate hikes by the Fed weren't tightening things up. (Attempting to quote the article in a perfectly legal and ethical way under fair use guidelines, but the FT website is trying to mess with my post)
Now that we're starting to see the results of tightening, and with China launching its petro-yuan and a physical gold exchange, do you think the Fed will change course?
I don't think so. It's more likely to be a coincidence. Either that or the wall street is really interested in investing their bonuses into Bitcoins. 😬
Crypto markets move very differently than stock markets so I don't believe there's any correlation between crypto markets and the stock markets.
Look at that chart above, there is no denying that there has been major correlation between the two over the past 3 months.
Hmm I don't disagree that we can see a correlation in last few months. I'm saying that even if it's better to be informed, it's not enough.
Where I was coming from is I think it's better to watch it further before we can conclude that. The reason I was saying of crypto markets moving differently is - the next time there's going to be an up move of BTC reaching a new ATH, say 80k for calculation's sake, it would have moved up by a 1000%.
If we're saying that there's a correlation between stock markets and crypto / BTC prices, it also follows that the stock markets would reach a new ATH in similar % in tandem with BTC which isn't likely.
I think it would be dangerous if the reality turns out to be what you're saying, the two markets being correlated. I have equity investment background and a 30% drop in my investment in any stock would have turned me away from investing altogether.
The truth is crypto is a completely new asset class in itself and its price is affected by a lot of other factors outside of control of the wall street money. Think of alt coins, ICO economies. BTC aside, some micro cap cryptos have even moved up 900%, 1000% in a day.
Hypothetically, it's also possible that crypto/BTC price would go to 0 in a day or say a month. If that were to happen and the markets are correlated, we would see an economy crash worse than 2008. So it would be catastrophic to the entire world. It works in everyone's favour when the stock markets and cryptos are not correlated. Stock markets cannot digest a 70% dip such as the current one. Also crypto is a 24x7 market unlike the stock market. So a high correlation would also mean some BTC whale that got in really early sitting somewhere in remote village can turn the economies of countries upside down just by deciding to sell off his Bitcoin stash like in the case of Mt Gox whale. That's hardly desirable.
They used to move independently. The money manipulators started using derivatives to manipulate the price...right around the time Morgan Stanley is bragging about here.
My point was they cannot stay correlated for too long. Stock markets would never be able to digest a 70-80% crash such as the current one.