Investor John Hussman says in Business Insider that the stock market is on the brink of collapse. He even states that a market crash of 65% is still optimistic. Does such a crash affect bitcoin? And if so how?
Growth for ten years
Last month, the American economy recorded its longest period of growth in its history. MSNBC even made a video report of this entitled How The U.S.. Avoided A Recession For A Decade. This is now officially the longest period in which the economy has gone without recession.
You might think that this is a reason for a party, but many wonder if this growth is sustainable. That is because an enormous amount of money is being added to it. According to some financial analysts, a serious correction may come, which can wipe out almost all the profits so far.
Party almost over
Investor John Hussman tells Business Insider that we have every reason to worry. He is convinced that the return is on its way to the worst 12-year return in history. He makes these statements based on a weakening of internal statistics in the market. Hussman believes that this can lead to a fall in the share price from 50 to 65%.
According to his analysis, we can look forward to a crash that corresponds to or even exceeds 1929: “Based on the current market level, we expect the S&P 500 to generate a negative total return over the next 12 years.” It predicts a decade of negative equity returns.
Hussman claims that his indicators pointed him to crashes, including the dotcom bubble of the early 2000s. In April 2007, he also claimed that S&P would lose about 40%. Ultimately, this index fell by more than 55% in 2008.
Bitcoin in theory and practice
If his scenario comes true, this also has consequences for bitcoin. And there is a big difference between theory and practice. First the theory: Bitcoin is often described as insurance against irresponsible financial risks and a potential economic downturn. Bitcoin is a way to step out of that craziness and retain value.
In some cases that is also correct, just look at countries such as Argentina, Venezuela and Zimbabwe, where hyperinflation is a daily reality.
But bitcoin has not yet been able to prove itself during a recession or a collapsing economy where a world currency such as the dollar dominates. And then we come to the reality, the harsh reality.
Compliant
Tom Lee from Fundstrat is known for his always positive attitude towards the bitcoin course. But even in a segment on CNBC Money, he says that bitcoin tends to follow the S & P500 course. The higher this stock index rises, the higher the bitcoin price. And that also applies the other way around.
Bitcoin has acted diligently in the past year. But those are still relatively small movements. The question is whether bitcoin can fulfill the dreams of Satoshi. Can bitcoin be a national insurance policy against a subsequent crash?
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