BitcoinMarketsBusiness

Goldman Sachs Predicts a 20% Stocks Upsurge—How Will This Affect Bitcoin?

$71 billion USD banking giant Goldman Sachs anticipates the S&P 500 to surge 20% by the year’s end. Since April, Bitcoin and the S&P 500 have been seeing some correlation, and favorable market conditions could benefit Bitcoin’s long-term trajectory.

David Kostin, the chief U.S. equity strategist, stated in a note:

"As the last few months have demonstrated, equity prices depend on not just the expected future stream of earnings but the rate at which those earnings are discounted to present value. Looking forward, a falling equity risk premium will outweigh a rise in bond yields, and combined with our above-consensus EPS forecast, will lift the S&P 500 Index to 3,600 by year-end."

Rough Correlation, Positive Gold Sentiment, and Rising Liquidity

In the second half of 2020, JPMorgan strategists said that rising liquidity, multi-trillion-dollar stimulus, and aggressive fiscal policies from central banks caused stocks to surge. 

Similar macro factors that positively affect the stock market have seemingly pushed Bitcoin upwards in recent weeks. Hence, the increasing momentum of the stock market could buoy the sentiment around bitcoin.

Data from cryptocurrency market data provider Skew shows that Bitcoin has roughly followed the trend of the S&P 500 in the last four months.

The correlation between Bitcoin and the S&P 500. Source: Skew.com

Prior to April, there was no clear correlation between Bitcoin and the stock market. Following the March crash, however, when Bitcoin and stocks plunged in tandem, both have simultaneously rallied.

Rising Gold Demand Is Another Positive Factor for Bitcoin

On August 14th, Berkshire Hathaway revealed that it had cut its positions in major U.S. banks such as Goldman Sachs. The investment conglomerate replaced the bank stocks with a position in Barrick Gold, a gold mining company based in Ontario, Canada.

Warren Buffett, the CEO of Berkshire, has long steered away from gold, criticizing its value proposition. Buffet’s shifting stance on gold has analysts speculating on whether the viewpoints of prominent investors on Bitcoin could one day change as well. 

Naeem Aslam, the chief market analyst at AvaTrade, stated:

“Warren Buffet bought gold according to 13F filing, he never advocated buying gold. He dumped Goldman Sachs and reduced position in JPMorgan among other U.S. banks. Will he ever buy Bitcoin? It is inching closer to $12K today.”

The confluence of the concurrent uptrend of Bitcoin and the S&P 500 since April as well as the rising demand for alternative assets like gold establish a positive macro backdrop for Bitcoin.

author avatar image

written by

Joseph Young is a financial analyst based in South Korea. He has covered Bitcoin and the crypto market since 2013. He regularly contributes to the BTC Times, Forbes, and Cointelegraph.