:max_bytes(150000):strip_icc()/GettyImages-2190552019-71448917ed364bd0b53db8d93ff1d5ef.jpg "Are Stocks Weighing on Crypto—Or the Other Way Around? Here’s What Experts Think")
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Key Takeaways
- Fundstrat’s head of digital asset strategy said the weakness in crypto was macro, with crypto traders “front-running” a selloff in stocks.
- But there’s a counter view: Interactive Brokers’ chief strategist said bitcoin’s tumble was the “proximate trigger” for Thursday’s intraday reversal in the stock market.
Have you seen the Spider-Man meme? You know—the one where two cartoon Spider-Men point at each other?
That might be a metaphor for the mood in risk assets these days, with some experts suggesting that stocks are to blame for the weakness in crypto markets, and others arguing that crypto is weighing on stocks. Whoever might be right, that investors seem to be reacting to excesses in both may not bode well for either.
The S&P 500 and tech-heavy Nasdaq indexes are rebounding a bit Friday, but coin markets continue to bleed. The price of bitcoin has tumbled roughly 8% in the last 24 hours, breaching the $81,000 level, moving closer to April’s year-to-date lows.
Interactive Brokers’ chief strategist on Friday suggested that yesterday’s intraday pivot in broad market indexes happened as bitcoin, which is being used as a “proxy for speculative fever,” started to fall below $90,000.
Why This Matters to Investors
Crypto is sometimes described as a risk asset; at other times, it’s seen as a hedge. Whatever your position, the recent slide in the price of bitcoin, the leading crypto coin, has investors debating the question anew, with some saying traders view it as leading stocks lower and others arguing that a softening outlook for tech stocks is weighing on all risk assets.
“I’m not gonna say that bitcoin is the reason that we had the big intraday reversal. Bitcoin was the proximate trigger,” Steve Sosnick said in an interview with CNBC, explaining that algorithmic traders are using it as a “lead.”
Fundstrat’s head of digital assets Sean Farrell, in a Thursday note, felt otherwise about falling crypto prices. “We were just front-running an equity selloff triggered by skepticism around AI CapEx sustainability and potentially a ‘Fed Mistake.'” (Investors are closely watching the possibility of a rate cut at December’s Fed meeting, with concern that it might stand dragging on markets lately.) Stocks moving lower would be a headwind for coin prices, he added.
Crypto in October suffered the biggest liquidation event in its history, when $19 billion in positions was wiped out between Oct. 10 and 11. The problem was leverage, the use of borrowed funds to amplify returns. The even seems to have shaken confidence in crypto markets. Meanwhile, bubble-talk around AI, and whether the rally in related stocks has reached unsustainable levels, has weighed on stocks, with the major U.S. indexes at risk of logging their worst week since early October.
Almost all of the top 100 coins in market-cap terms have fallen alongside bitcoin over the last 24 hours, according to Messari, a crypto research platform. Altcoins ether and sol are down roughly 9% over that time. But some other crypto-linked assets, including shares of Coinbase Global (COIN) and Strategy (MSTR), are holding up a bit better, down about 1% and 2%, respectively.
