A prediction by Goldman Sachs casts pessimism on bitcoin
A prediction by Goldman Sachs casts pessimism on bitcoin

A prediction by Goldman Sachs casts pessimism on bitcoin

By Marco Cavicchioli - 27 Apr 2020

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The price of bitcoin could fall again due to a new possible collapse of the financial markets predicted by Goldman Sachs

In fact, Bloomberg recently published an article in which it reports an analysis by David Kostin and other Goldman Sachs analysts revealing that 20% of the entire market capitalization of the S&P 500 index is attributable to only 5 companies.

Moreover, although the value of this index is currently only 17% lower than the February record highs, the average value is even 28% lower than the peak. 

In other words, after taking away the 5 companies that are performing well, the others are still in deep red. 

Usually, the total value of these 5 companies is less than 18% of the total market capitalization of the S&P 500, and when it reached this threshold in March 2020 it triggered a collapse. 

As this figure is now at 20%, Goldman Sachs analysts speculate that a further significant drop in prices in the financial markets could be on the horizon

In addition, this figure fell during the recessions of 1990 and 2008, during the bursting of the dot-com bubble and during the economic slowdowns of 2011 and 2016. 

This view is also shared by Bloomberg’s chief intelligence strategist, Gina Martin Adams, who stated that this figure has not moved at a pace consistent with recent increases. 

The point is that, as CoinMetrics reveals, since February, there has been a sharp increase in the 180-day correlation between the fluctuations in bitcoin prices and those of the S&P 500 index, now also higher than that between bitcoin and gold

To date, on a scale from -1 to +1, the 180-day correlation between bitcoin and S&P 500 has risen to a record level of 0.17. 

This is not enough to imagine that this correlation could continue in the future, considering for example that before February it was in negative territory, but since it was already in positive territory for some periods in the past, as for example in the first part of 2019, this hypothesis cannot be excluded at all. 

On the other hand, however, it must also be said that the 180-day correlation between the fluctuations in the price of bitcoin and that of gold has been in positive territory uninterruptedly since May of last year, despite the fact that following the collapse of the financial markets in mid-March, the correlation with the S&P 500 index has been reduced and exceeded. 

Therefore, the hypothesis of a further collapse of the financial markets cannot be excluded, just as the hypothesis that this may also lead to a further collapse of the bitcoin price cannot be excluded either

However, these are not the only possible assumptions, in part because the imminent bitcoin halving could turn the tables. 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded, and his YouTube channel has more than 25 thousand subscribers.

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