Best Years for Equity Market Always Good for Bitcoin
The catalyst for the next leg higher for Bitcoin could be from the global equity market, a known market insider said. Fundstrat Global Advisors’ Tom Lee notes in a CNBC interview that Bitcoin has had a bumpy ride so far in 2019. There have been reported cases of institutional money flowing into the crypto space while, at the same time, the global debate over Facebook’s Libra – which France and Germany have this week declared rejected in the European region – brought attention to the cryptocurrency.
However, he believes the equity market has to hit an all-time high before Bitcoin could do the same as, going back the last ten years, the best three or four years of the S&P coincided with the best years for Bitcoin.
“I think Bitcoin has kind of stalled recently because the macro outlook is stalled,” says Lee. “I think in a world without trend, Bitcoin won’t go up. So I think the next big catalyst is a decisive break out in the equity market because once equity breaks through its all-time high, Bitcoin becomes a risk-on asset.”
It is known that investors’ appetites for risk rise and fall over time. When talks of whether cryptocurrencies will be a ‘safe haven’ asset in the event of an economic downturn, it attracted several commentaries from within the space in support or against the view. They include Jehan Chu, the co-founder of Social Alpha Foundation, who shares that Bitcoin is increasingly compelling as a digital safe haven going by today’s markets openness.
“Family offices from across Asia and Europe are stepping into digital gold as not only an option on the future, but a shelter from the present turmoil,” he says. “When the dust settles, Bitcoin will emerge as a normalized asset class” and gain the most from capital seeking safety because it is “the biggest and most recognizable brand in crypto”.
He adds that other cryptocurrencies may benefit in part though may have to compete on the fundamental value of their utility, and cites the likes of Libra, Tether, and smaller but rapidly growing regional stablecoins like Terra in Korea as surprises.
But Concordium‘s Lars Seier Christensen, sees things differently saying cryptos could go either way in the event of a recession — a safe haven and a suffering for investors as they adopt a risk-off approach. “In general,” he states, “I think bitcoin is a non-correlated, volatile asset driven by die-hard maximalists and often manipulative, two-way players. Bitcoin movements are close to random and I think there is little predictive value to be found in the general economic conditions.”
Regardless of other and past views, Lee’s immediate outlook for the cryptocurrency market is fixed on a promising rise for Bitcoin. He says: “What may end up playing out is that the S&P reaches an all-time high, Bitcoin reaches an all-time high – which is not too far away for Bitcoin, then I think it would likely lead to the start of alts season.”