Cryptocurrency, Goldman Sachs, Stock Market–While investors respond to the upcoming Bitcoin Cash hard fork, the majority of the market continues to anticipate news surrounding the approval of a Bitcoin Exchange-Traded Fund by the United States Securities and Exchange Commission, a move that could signal the entrance of large capital institutional investors.
Last week, EWN covered a report by Bloomberg that the lack of interest was behind Wall Street’s slow burn effort to get involved in cryptocurrency. However, a falling and uncertain stock market could pave the way for greater crypto recognition as investors look to get out of the traditional markets and into the increasingly price stable landscape of Bitcoin.
On Monday, Goldman Sach’s bear market prediction tool was updated to “flashing red,” achieving the highest level of instability and regression to come by the stock market since the 1960’s and 1970’s. Historically, the tool has indicated a zero percent return over the next 12 months while also signaling that stocks pose a substantial risk for investors who continue to trade and stick by them.
According to CNBC,
“Goldman’s bear market indicator — which takes into account the unemployment rate, manufacturing data, core inflation, the term structure of the yield curve and stock valuation based on the Shiller PE ratio — is at a rare 73 percent, its highest level since the late 1960s and early 1970s.
The caution from one of Wall Street’s banking bellwethers came as the Dow Jones Industrial Average and S&P 500 each added to steep losses over the past few weeks. The Dow finished Monday’s session down 602 points — or 2.3 percent — while the broader S&P’s slid 1.9 percent, bringing its three-month move to a loss of 3.7 percent.”
Goldman chief global equity strategist Peter Oppenheimer went on to write that the indicator was approaching a dangerous prognosis for the health of the market moving forward, a sentiment which echoes JP Morgan’s prediction that the U.S. market has a 60 percent chance of recession by the year 2020.
“Historically, when the Indicator rises above 60 percent it is a good signal to investors to turn cautious, or at the very least recognize that a correction followed by a rally is more likely to be followed by a bear market than when these indicators are low.”
While cryptocurrency is not guaranteed to benefit from the falling price of stocks, particularly those of the technology sector which are currently being hit the hardest, more analysts are turning to the crypto markets as an alternative in the event of a recession. Institutional and Main Street investors alike are going to look to harbor their funds in an asset that has potential to appreciate in a slumping stock and bond market.
In addition, movements in the security of the U.S. dollar could lead more people to look to Bitcoin and cryptocurrency as a way to escape incessant inflation. Despite 2018 being a crushing bear market for Bitcoin and altcoins, the industry has managed to grow in terms of development and adoption–two features that could contribute to another price boom as more of the general public becomes aware of and invested in the digital asset.