Many investors think that the correlation between the main planet index sp500 and Bitcoin has stopped. The argument of such investors is as follows: “Bitcoin is growing throughout 2023, but the index is not growing!” On the one hand, this is true, but now sp500 is trading at the same levels as in June 2022. At that moment, Bitcoin also cost $30,000. It turns out that in 2023, Bitcoin has just begun to restore its correlation with the index.
🩳 Record shorts on the US market
Today sp500 is near this year's highs, and the situation in the world is very contradictory. Hedge funds have their highest shorts since 2007 in SP500
If there is even the slightest positivity in the markets, this could trigger a cascading unwinding of short positions, leading to strong gains in some assets.
The situation in the real economy is indeed very dramatic: the number of shares from the sp500 that are outpacing the index in terms of growth at a minimum in recent years - this indicates the weakness of the sp500. All of the index's growth since the beginning of the year has been accounted for by just 15 companies.
The market is now at a crossroads 🔀
In the coming weeks we will see increased volatility and strong movements in the market. The factors mentioned above can be interpreted either in favor of growth or decline. Don't forget that sometimes hedge funds are right - before the 2008 crisis, their similar bet worked.
BUT, do not forget that before the 2008 crisis, the Fed had not yet used the “printing press”. And the bankruptcy of SVB showed that in an emergency, the Fed is again ready to print hundreds of billions, even despite high inflation.
✅ The markets are currently on a powder keg as the US economy is not doing well. Also, do not forget that the rate is still high and the process of tightening monetary policy continues. Therefore, at any moment this powder keg can explode and then all assets, including the crypto market, will fly down. This is most likely to happen during rate cutting cycles. You can read more about this in our previous next post.
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