Analysts from Piper Sandler expressed concerns about Bitcoin's growth potential, highlighting the need for profit-taking and correlation with the stock market.
Profit-Taking Advice
This week, Piper Sandler's chief investment strategist, Michael Kantrowitz, advised investors to start locking in gains on positions that have surged since early April. It is important to consider the current market conditions, which are shifting from expectations of an inflation-driven recession to a more stable 'Goldilocks' environment.
Correlation with the Stock Market
Kantrowitz noted that Bitcoin is not immune to risks associated with the stock market. He pointed to a 'very tight directional correlation with equity market risk', warning that if there were a sell-off in risk assets, Bitcoin would likely decline as well. For instance, after the tariff announcement in April, Bitcoin fell 5% alongside a 4% drop in the S&P.
Autumn Risks and the Market
As August approaches, typically a weak month for both cryptocurrency and stocks, Kantrowitz cautioned about potential declines in trading volumes. Among other risk factors, he also highlighted the possibility of rising consumer price index readings, which may affect investor expectations around interest rate cuts.
Overall, current market conditions and anticipated economic changes could significantly impact Bitcoin and other risk assets. Investors should heed risk management advice and keep a close watch on developments in the stock market.
