Can Bitcoin Capitulation Indicate Stock Market Bottom?

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For the past week, we’ve enjoyed both a resurgence in stocks and crypto. Question is whether it will last and what might be a bottom indicator. While investors are already fearing the middle of July when the new inflation numbers will come out, Mark Mobius, famed emerging-markets trader, says we should be looking at bitcoin instead.

Hedge against inflation

Up until May of this year, it was believed that Bitcoin could be a hedge against inflation. The reason for this belief is that supply of the world’s best known cryptocurrency is capped at 21 million, creating scarcity as demand for it increases.

However, when the latest CPI (consumer price index) reading came through half of June and it was clear that inflation in the USA was nowhere near ready to drop, tech stocks and crypto coins saw another major selloff and the hedge against inflation hypothesis suffered a major blow.

#Stocks and #bitcoin both have matching cycle lows around July 10th timing band. Little weary leading into that.

— Bob Loukas (@BobLoukas) June 20, 2022

There could however be a new way to use the price of Bitcoin because a famed Wall Street trader claims that if we want to find out where the bottom of the current bear market is located, we should look to crypto instead of stocks.

Measure of investor sentiment

Mark Mobius, CEO Of Mobius Capital Partners is not anybody. He spent more than three decades at Franklin Templeton Investments and has been widely seen as a veteran emerging-markets trader and savant of the markets in India and China. He feels that Bitcoin has now started to act as an indicator of stock markets.

Cryptocurrencies are a measure of investor sentiment, he stated. Bitcoin goes down, the next day the Dow Jones goes down. That’s the pattern you get. That shows that Bitcoin is a leading indicator.

#Bitcoin’s tight relationship w/Tech stocks, fueled by declines in both amid Fed hikes & high inflation, drops amid crypto rout. Bitcoin“s 20d correlation w/Nasdaq 100 has fallen from ~0.88 in early May to the low-0.30’s now, BBG has calculated. pic.twitter.com/0j3fRb6gtJ

— Holger Zschaepitz (@Schuldensuehner) June 21, 2022

Mark is therefore convinced that as long as Bitcoin investors are still talking about buying on dips that means there is a feeling of hope. However, according to him there is also another side to that equation because that also means that we have not reached the bottom of a bear market.

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