SPY - Bitcoin's Fading Action Is A Huge Warning For Stock Market Liquidity

2024-05-25 10:29:36 ET

Summary

• Bitcoin's price is influenced by liquidity changes in the financial system and investor interest in decentralized money.
• Bitcoin has lagged behind the stock market's rise to new all-time highs in May, which may indicate a negative shift in market liquidity.
• The historical trading evidence suggests Bitcoin tends to peak before the S&P 500 index, making it a potential indicator of future stock market direction.
• Falling Bitcoin prices in June-July would be a bearish development for the S&P 500 and Wall Street generally.

Bitcoin ( BTC-USD ) ups and downs in price since inception can almost entirely be traced to two factors - financial system liquidity changes and investor desires to own a "decentralized" digital currency as a hedge against fiat money printing. Honestly, without deficit-happy government spending around the world, I doubt Bitcoin would have a good reason to exist.

Believe it or not, this makes Bitcoin (and other cryptocurrencies as a group) an excellent indicator of future stock market action, functioning as a grand risk-on money flow indicator. When you do the research, Bitcoin tends to lead the stock market for trend (both up and down), by varying degrees over its short history from invention in January 2009....

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