Popular Bitcoin Bull and Fundstrat exec Tom Lee, has said that there is a correlation between the equity market and the Bitcoin market. Lee says that Bitcoin with reach a new all-time high after the S&P 500 stock does as well.
The cryptocurrency market is purported to be a break from the traditional markets, especially because of its decentralization. There is also the fact that global financial policies or unfavorable financial climate, which heavily affects traditional financial assets, do not have the same effects on the digital currency markets. However, even with all the dissimilarities, popular Wall Street strategist Tom Lee has drawn a parallel between the traditional stock market and the cryptocurrency market, saying that Bitcoin works best when the stock market is vibrant as well.
Stock Markets Push Crypto Markets
Bitcoin’s current all-time high of $20,000 was achieved in December 2017. After that, there was a very harsh bear market that started very shortly after this feat which eventually ended in a bull run this year in April. There have also been more than a few predictions from several different analysts with very bullish opinions, most of which don’t seem to be coming to pass.
However, Fundstrat Global Advisors co-founder and Head of Research Tom Lee, has suggested during an interview with CNBC’s Fast Money, that for the crypto market to surge, we should first see a spike in the general equity markets. According to Lee:
“I think that there have been tailwinds building for Bitcoin. One has been institutional money potentially coming through things like Bakkt and programs like Libra and the technicals have been better. But I think Bitcoin has kinda stalled recently because the macro outlook has stalled.
In a world without trend, Bitcoin doesn’t go up. So I think the next big catalyst is a decisive breakout in the equity markets because once equities reach an all-time high, Bitcoin becomes a risk-on asset.”
Bitcoin and the S&P 500 Stock Index
Lee further added that Fundstrat released a recent publication to its clients which analyzed the S&P 500 and its price behavior over the last decade. Lee remarks that in that period, the three or four best years of the S&P 500 have directly coincided with the best years of Bitcoin. Based on the Fundstrat analysis, Bitcoin performs best when the S&P is up more than 15%.
After this remark, Lee was then asked whether or not this analysis dismisses the notion that Bitcoin is not a good enough hedge against the traditional financial systems. To this, Lee says that “Bitcoin may ambidextrous”. This directly means that the asset could work in both ways – as a hedge against a poor economic climate but can also wither in the same circumstances.
Lee has also predicted that the S&P 500 will end the year at 3,125, higher than its all-time high of 30125. This surge, Lee notes would be bullish for Bitcoin as well.
“Bitcoin may be ambidextrous. It works well in a risk-on world, but when you start to get nervous, then you treat it like digital gold.”
Lee has also added that the rally could further improve altcoins as well. According to him, an increase in the S&P 500 pushing it to its all-time high would also push Bitcoin to its own all-time high as well culminating in a trajectory that would “likely lead to the start of altseason.”