Experts are beginning to say that a crash in bitcoin will spill over into the stock market
Further, they are saying that the pullback we are currently seeing in bitcoin is already hurting the stock market.
(One such source: http://fortune.com/2017/12/26/bitcoin-stocks-slump/)
My response to that:
Are you kidding me?!
How in the world is bitcoin selling off going to affect the stock market in any meaningful way?
A bit of perspective:
The entire cryptocurrency market cap is $590 Billion (with a "B"), while the entire S&P 500 has a market cap of over $24 Trillion (with a "T").
(source: https://coinmarketcap.com/)
Of that $590 Billion, Bitcoin makes up about $270 billion worth, so just under half.
Are you trying to tell me that a $270 Billion dollar market is going to wreak havoc on a $24 Trillion dollar market should it start to crash?
That comes out to roughly 1% of the market value of the S&P 500.
Are you telling me that a selloff in an asset that is 1% the size is going to cause any meaningful contagion?
I find that very hard to believe.
Some caveats:
If some funds are way over leveraged on bitcoin and they get caught on the wrong side, then perhaps we could see some spill over, but for now there are so few instituions in bitcoin that there is no way this could happen right now.
What about retail holders who suddenly find themselves getting margin calls or finding themselves down heavily in their bitcoin investment?
First of all, there aren't likely to be any margin calls for retail buyers. Not many places out there that are loaded with retail investors allow you to buy bitcoin on margin.
So, we can probably shoot down that line of thinking as well.
I would actually argue that bitcoin going up is more of a danger to the stock market than if it crashes, people will be pulling money out of stocks to put into bitcoin as the returns are far outpacing U.S. stocks.
Overall, I find the notion that bitcoin could somehow have some contagion effect on the U.S. stock markets were it to really sell off very hard to believe.
My opinion is, the ones making these claims are trying to be the first to sound the alarms if bitcoin should grow many multiples of where it is today.
That and they are trying to get views/clicks.
Remember, doom and gloom sells. As does attaching your name to anything bitcoin right now. :)
Stay informed my friends.
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no it wont but infect other currencies will get more weightage due to that the market will raise more and more currencies will begin to raise
I agree that Bitcoin shooting up to $100,000 is a much bigger threat for the stock market than crashing to $1000!
My thought as well. Bitcoin isn't intertwined with the real economy basically at all at this point. Not many institutions own it and the exchanges that do trade it aren't trading anything else. No much contagion risk at all in my opinion.
Hello @otage ! I see a consensus among fin. system experts that when the “King’s Men” see a serious threat to tax revenues or to official management of monetary policy they are going to “come out swinging”. What do you think of the notion that the threat will be quite apparent when the bitcoin price gets so high that there will be enough tiny fractions of one bitcoin around to support buying and selling goods and services (using those tiny fractions) on a wide scale? Do let me know if you see any discussions on this matter, and thanks in advance.
I think the rise of crypto is indicative that the rest of the economy will soon hemorrhage, but no, I don't see any bitcoin slump affecting the economy.
Thats ridiculous. Crypto is such a small percentage of the market. Where is the money going?
"Experts"
So in reverse when bitcoin goes up and if stocks go up can it be said that its all thanks to bitcoin? Of course not. Everyone who are crypto haters will try to find a way to blame crypto for everything. This is the type of review that we do not need. There is no parallel between crypto and stocks. If those bankers and the government did not scam so many of us I think crypto would never have boomed the way it is now.
The market cap for crypto will continue to grow as more people diversify their investment portfolios. After going through the 08-09 crash I do not have faith that my 401k will earn me enough for retirement and I think many in my generation, millennial, and the younger generations believe the same.
Yep, I am with you 100%. Good comment.
I think it will have some impact but not to the extent like in 1999 during dot com crash. To reach that level crypto has to takae off for few more years. But this rally and bubble is not sustainable but block chain will be
to be fair, the overall concept of crypto market affecting stock market isn't so outlandish; remember, "subprime" loans wasn't anywhere close to overall size of stocks/bonds yet had a profound effect in 2008-2009.
That said, a little dump like Thursday really doesn't do much, prices were still WAY WAY up for even the week on that day. Furthermore, even if cryptos have an effect on stocks, it is most likely the effect would be delayed by a decent amount of time, measured in months if not years.
Good point, though the mortgage market was roughly $10 trillion at the time. Not subprime, but the entire market. Plus it was much more interconnected to the overall economy than something like bitcoin.
Subprime really wasn't connected to the larger market that much, only in similarity of sector.
Same goes for crypto, it's the subprime of fiat right? While bitcoin itself may not be able to print money, other cryptos DO simply by being created. And also bitcoin itself now forks often, thus doubling and pentupling itself. Regular fiat rarely does that (except in the 1930s when the US gov't spot-reduced the value of the dollar to stop specie payments).
A subprime crash can create a feeling of poorness from once heightened wealth, and that can create tightening of the belt, just like crypto rising creates the opposite ,no? Almost a trillion in crypto has been created from nothing, and those crypto millionaires spend money. That creates a rise in spending, which will create an even worse stoppage of spending on the "other side" if crypto bubble collapses.
Bitcoin started during the last stock market crash -
so they both also started a bull run around the same time ,
so chances are they will also be in a bear market around the same time
ELLIOT WAVE --
BTC/crypto next bull run will be dwarf the run we just had
in percentage terms or absolute terms?
Crypto markets definitely wouldn’t affect the stock market at this point in time. Cryptos are a totally different class of “asset”. They are completely independent. The way the BTC Futures are set up doesn’t even affect it. This is a ridiculous claim. The types of investors are totally different as well in general. Crypto investors are anybody. Small money. Big money. Etc. anybody. Stocks are companies and people with big money. There is no affect on the stock market from crypto markets. It’s a crazy claim
Yep, and they are not really interconnected at all. The same exchanges that trade stocks, don't trade cryptos. Also the few funds that invest in crypto, aren't really stock funds... so very little interconnection.