Does the collapse of Bitcoin sound the death knell for the rise of the S&P 500?

Bitcoin's recent decline could portend a summer correction in the US stock market, according to Stifel analysts. As crypto struggles to return to its March highs, experts are wondering about the implications for the S&P 500 index, a key barometer of the American economy.

A historical correlation that worries the markets

Barry Bannister, chief equity strategist at Stifel, highlights the strong correlation between Bitcoin and the Nasdaq 100 since 2020. This relationship is explained by the perception of BTC as a speculative asset rather than “digital gold”.

Stifel's analysis revealed that the S&P 500, a major stock index of the 500 largest companies listed in the United States, tends to stagnate in the six months following Bitcoin peaks.

This pattern repeated itself several times, suggesting a possible decline in the US stock index. The current divergence between the weakness of Bitcoin and the continued rise in the stock markets, driven by the technological giants, could therefore herald a reversal of the trend.

Bitcoin, which traded around $66,012 on Thursday, shows a drop of more than 10% compared to its all-time high of $73,462.59 reached on March 13, 2024. This persistent weakness intrigues observers, especially as the stock market continues to reach new highs.

Macroeconomic factors at play

Stifel analysts emphasize the crucial role of the US Federal Reserve's monetary policy. Since 2011, the Fed's dovish guidance has largely contributed to Bitcoin bull markets. However, persistent inflation could push the central bank to take a less favorable stance, exposing the S&P 500's overvaluation.

In this context, large-cap technology stocks, such as Nvidia, appear particularly vulnerable. Stifel anticipates a possible correction in the third quarter, calling into question the leadership of these stocks in the year's stock market gains.

Despite these warning signals, Stifel strategists do not rule out the possibility of a continuation of the rise in the short term. They evoke a possible “bubble mode” for investors, comparable to past speculative episodes.