Fund Managers Sell US Stocks: What It Means for Bitcoin’s Future

In recent years, Bitcoin’s price movements have shown a remarkable correlation with the US equity market, particularly with indices like the tech-heavy Nasdaq and the benchmark S&P 500. This relationship has raised concerns among investors, especially in light of recent data from Bank of America, which indicates that fund managers have dramatically reduced their exposure to US equities.

Record Sell-Offs in US Stocks

According to Bank of America’s latest report, investors slashed their exposure to US equities by a staggering 40 percentage points between February and March. This marks the sharpest monthly decline since the bank began tracking this data in 1994. The phenomenon has been termed a “bull crash,” reflecting rising fears of a global economic downturn.

With a net 69% of surveyed managers declaring the peak of “US exceptionalism,” the data signals a seismic shift that could have far-reaching implications for risk assets like Bitcoin. The persistent correlation between Bitcoin and US stocks, particularly over the past 52 weeks, raises questions about how this sell-off will impact the cryptocurrency market.

Concerns Over Global Recession

Adding to the unease, 55% of fund managers identified “Trade war triggers global recession” as the top tail risk, a significant increase from 39% in February. Additionally, 19% expressed concerns that inflation could lead to Federal Reserve rate hikes—both scenarios that could dampen enthusiasm for riskier assets like Bitcoin.

Bitcoin’s Price Dynamics

Bitcoin’s price has experienced a notable decline of over 25% following its record high of nearly $110,000. This drop raises questions about the cryptocurrency’s resilience and potential for recovery. “Historically, Bitcoin experiences these types of corrections during long-term rallies, and there’s no reason to believe this time is different,” stated Nick Forster, founder of Derive, in an interview with Cointelegraph.

Forster emphasized that the next six months for Bitcoin will largely depend on the performance of traditional markets, particularly stocks. Historically, Bitcoin tends to return to the 50-week Exponential Moving Average (EMA) after undergoing strong rallies. A decisive break below the wave support has previously signaled bear markets, as seen in the correction cycles of 2018 and 2022.

Potential Outcomes for Bitcoin

A clear breakdown below the wave support could lead Bitcoin bears to target the 200-week EMA, which is currently below $50,000. This scenario echoes the downside sentiment highlighted in the Bank of America survey. Conversely, if Bitcoin manages to hold above the 50-week EMA, it could pave the way for new sessional highs, similar to the market dynamics observed in 2024.

Should Bitcoin recover from the current wave support, the potential for price appreciation remains high. However, the cryptocurrency market is notoriously volatile, and investors must remain cautious.

Investment Considerations

This article does not constitute investment advice or recommendations. Every investment and trading move involves risk, and readers are encouraged to conduct their own research before making any financial decisions.