The economy is on thin ice and jobless claims are still outrageously high, yet the stock market continues its V-shaped recovery and powerful rally. However, one chief investment officer claims that a stock market day of reckoning is coming – one that could also cause another sharp collapse in Bitcoin.
If the stock market does indeed crash due to fundamental weakness, will Bitcoin price follow and retest Black Thursday lows?
Day of Reckoning To End Irrational Exuberance in the Stock Market
At the start of the year, the stock market set new records for the highest prices ever recorded. Around the same time, Bitcoin had recovered to over $10,000 and looked to be beginning a new uptrend ahead of the asset’s halving.
But a black swan event arrived with the emergence of a widespread pandemic that continues to have a crippling effect on the economy even today.
Lockdown conditions remain intact, and protests and violence have erupted all over the world due to individuals fed up with the status quo. The conditions aren’t at all ideal for a major stock market rally, yet stock indices like the Nasdaq, Dow Jones, and S&P 500 have made unexpected recoveries.
Individual airline stocks and rental car chains that have recently filed for bankruptcy, have exploded with sudden growth. The market is behaving completely irrationally, leaving one expert to say that investors are in “la-la land,” and expects a day of “reckoning” in the stock market soon.
“The mania is based on a widespread hope in Fed money printing. The catalysts for reckoning are numerous as a major cyclical economic downturn has only just begun,” said Kevin Smith, Crescat Capital’s chief investment officer.
This day of reckoning, can bring the irrational exuberance across the stock market to a screeching halt and may take Bitcoin down again with it once again.
Bitcoin Could Dump 20% Or More If The S&P 500 Collapses
Due to the correlation in Bitcoin and the stock market, any day of reckoning in the stock market puts the cryptocurrency space at risk for another collapse.
Trigger-happy crypto investors may be ready to dump the high-risk assets at the first sign of rejection in Bitcoin price. The asset has been trading sideways for over 50 days now, and a major move is expected when the record-low volatility finally breaks.
Bollinger Band Width is showing some of the lowest volatility in the typically volatile asset, and a variety of unusual factors such as today’s Quadruple Witching in the stock market, Mercury in Retrograde, and more could cause a shakeup in the already fragile financial space.
A day of reckoning in stocks could be disastrous for Bitcoin. Data shows that after this much consolidation, a 20% move usually follows any breakout. A crash in stocks could pull Bitcoin down with it once again – just like it did on Black Thursday in March.
It also could trigger the 20% move that most traders are preparing themselves for.