Bitcoin might have outperformed the S&P 500 index on a year-to-date scale, but the cryptocurrency would need to rely on the US equity benchmark to establish its all-time high, according to Thomas Lee of New York-based Fundstrat Global Advisors.
The co-founder on Thursday discussed the similarities between the trends of bitcoin and S&P 500 over the past decade. He stated that the cryptocurrency performed better whenever the index was 15 percent up from its 2009 average. At the same time, a depressive S&P 500 saw bitcoin underperforming, barring the year 2015, as shown in the chart below.
Bitcoin price performance against that of S&P 500 | Image credits: Thomas Lee
That, explained Lee, did not make bitcoin and S&p 500 strongly correlated. On the other hand, bitcoin following the index’s gains showed an “evident” scenario of it repeating a similar price action.
Is $BTC correlated with the S&P 500?@fundstrat‘s recent tweet got me thinking about this, so I looked into it and it appears that Google Trend data supports this notion.
As you’ll notice, searches for “Bitcoin” tend to spike alongside searches “S&P 500” and “Stock Market” pic.twitter.com/I6yPDFKryo
— Cole Petersen ⛓ (@ColePetersen14) September 12, 2019
S&P 500 Making its Move
Lee’s comments shortly after the US market opened in positive territory on Thursday. The S&P 500, in particular, inched towards its all-time high after a stimulus program announced today by the European Central Bank (ECB) weighed on the sentiments of a potential trade resolve between the US and China.
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The S&P 500 Index is hinting to reach its historical peak | Image credits: TradingView.com
President Donald Trump said yesterday that the White House would delay growing tariffs on $250 billion worth of Chinese imports. His decision came after Beijing lifted additional taxes on some US goods. Trade-sensitive stocks led the S&P 500 up by 0.3 percent, its best since July.
#ECB Cuts Deposit Rate to -0.5% from -0.4%, introduces QE from Nov1 at €20bn/mth. Changes guidance. pic.twitter.com/OraPQaBGC2
— Holger Zschaepitz (@Schuldensuehner) September 12, 2019
Meanwhile, investors interpreted ECB President’s Mario Draghi easing approach as a cue for the Federal Reserve to introduce similar measures to prop up the US economy. Trump earlier bombarded the US central bank officials with a string of tweets, demanding rate cuts below zero as their European counterpart weakens the Euro. The Federal Reserve is expecting to reduce rates by 25 bps in a meeting next week.
Analysts see a rate cut as a bullish sign for S&P 500, going by the index’s response to similar Fed calls since the early 1980s.
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Investors don’t fight the fed | Image credits: S&P 500
“Declines in returns during an easing cycle occasionally happen but are exceedingly rare,” Jason Trennert, chief investment strategist of Strategas, said in a note to clients in July. “With policy rates and 10-year yields at the highest levels in the developed world, the Fed appears to have plenty of room to ease without fear of prompting overheating.”
Bitcoin Uptrend, Meanwhile
Lee thinks a macroeconomic calamity is the least a bitcoin bull should wish for as of now. A rally in risk-on assets, on the other hand, gives bitcoin wings to fly.
The point of this tweet is to suggest that rooting for financial calamity may not be positive for the health of $BTC in the near term.
– arguably better environment for #bitcoin ATH is a strong global risk rally. https://t.co/y5Yo5NepPz
— Thomas Lee (@fundstrat) September 12, 2019
The comments somewhat consider bitcoin is a risk-on asset, especially at a time when a narrative of “bitcoin-is-safe-haven” is picking momentum.
Bitcoin surged 1.42 percent on Thursday while touching a session high of $10,374.99.
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