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Bitcoin could find itself in a stock market storm, like an experienced bond investor suspects.It is a 76,8% Chance that stocks will reach their lows in March, said Jeffrey Gundlach, the CEO of the 135-billion-Dollar DoubleLine Capital.The rally takes place without institutional money, which exposes them to the risk of serious setbacks.
What is bad for the stock market, is bad for Bitcoin.
The reason for this is that since the global market is routine in March 2020, a positive correlation has been developed. Apart from a few days to the decoupling of both the Bitcoin – as well as US equity holdings have fallen and recovered at the same time.
The trigger for the positive correlation of an unprecedented stimulus policies of the US Central Bank.
The US Central Bank has lowered its key interest rate to support to almost Zero, and an open-ended bond-buying introduced the program to help the ailing local markets in the recovery. In the last few months, the massive Liquidity injection by the Fed has increased its balance sheet to more than $ 3 trillion.
The balance sheet of the US Central Bank moves to a new record of 10 trillion USD | source: Macro-Bond
The stimulus money, or the mere promise of it, sent the Dow Jones, the S&P 500 and the Nasdaq Composite on the recovery journey. Even Bitcoin, which had fallen during the March-Routine by more than 60 per cent, could make its losses against the policy of quantitative easing, the Fed completely.
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The spectacular rally leaves behind a trail of disturbing warnings. Jeffrey Gundlach, CEO of DoubleLine Capital, in the amount of 135 billion dollars, made such a during his recent webcast to investors.
Accordingly, a rate of 76.8 percent Chance that the shares fall back to their lows of March was.
The so-called “bond king” says that the stock market rally was assumed to be the small investors. He added that the institutions were remote. Services such as Robinhood, the offer accounts with no trading Commission, experienced a massive influx of new traders who were playing with the Buy-the-Dip mentality, as the stock crashed in March 2020.
Asset allocation of the Millennials | source: Robinhood
But there needed to be a correction, so Gundlach. The Millennial Trader, the Chairman of the Federal Reserve, and Jerome Powell, a “Superman”. Nevertheless, the major players remain skeptical “in the face of this of a little guy created, epic rally”.
Bitcoin moves in similar waters. The market of the crypto currency is still aimed at small investors, with so-called “whales” in appearance, to strategic steps. So small Trader bought lately the Dips and the great playing against you.
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This has exposed both the stock market as well as Bitcoin the risk of a similar downward corrections.
The Bitcoin Question
As a Bitcoin skeptic, Mr. Gundlach recommends investors to increase their commitment in Gold. The yellow metal behaves typically as a safe haven against a shrinking share of the market.
He also stresses that The US Dollar will be weaker and this means that the Keeping of other national currencies, for investors who want to offset their share of risks, is an advantage.
BTCUSD trading 150% higher than in mid-March from its all-time low | source: Tradingview.com
With regard to Bitcoin, the institutions may need to go in its current rally to decouple from the stock market. From the recent report from Fidelity Investments (however, from March 2020) shows that 36 percent of the large investors possess the crypto-currency.
This includes pension funds, financial advisors, Hedge funds and Family Offices includes.
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