Content adapted from this Zerohedge.com article : [Source}(https://www.zerohedge.com/news/2018-02-12/morgan-stanley-no-coincidence-bitcoin-and-pe-multiples-peaked-same-day)
It appears the stock market and bitcoin are running in tandem.
At least that is what Morgan Stanley believes.
December 18th, the day before the Trump Tax Bill passed the U.S. Senate, saw the peak for bitcoin and the valuation on the stock market.
This was a pleasant surprise to Morgan Stanley's Equity Strategy group, because, as they write in a new note today, "we always viewed the tax passage as a likely place for the rally to take a pause." Of course, that didn't happen as earnings revisions far outweighed the multiple compression.
We find it instructive and rational that the market multiple did in fact peak that day. It also makes us feel a little better than our instinct was right even if our call for a market pause was wrong!
Furthermore, we find it instructive that Bitcoin also peaked on December 18th.
Morgan Stanley notes that their expectations of rising equity vol led by rates/FX vol and earnings estimate dispersion, are playing out, which they suggest should lead to lower multiples on higher, albeit lower quality, EPS driven by tax cuts but accompanied by falling operating margins.
Finally, they conclude, this vol shock/liquidity event has likely taken valuations too low at this point but realize such events have a way of overshooting to the downside which is why we have advocated patience in buying this dip.
Does that mean Morgan Stanley thinks bitcoin is a buy also?
Non-adapted content of this Zerohedge.com article:
I seriously don't care what Morgan Stanley predict. They are wrong so often on what they are "experts" on that I feel it is safe to assume they will be wrong on bitcoin also.
My 2 cents on the correlation: People liquidate bitcoin when stocks go down because they are receiving margin calls from there brokers
This coming from a man that recently said 'bitcoin may have no real-world value'. A lot of big names like Morgan Stanley that were criticising bitcoin are feeling guilty of the statements they made, and bitcoin is now disapproving the criticism they had for it. Though some are still hesistant to admitting they were wrong.. lets continue watching the space as they slowly make contradictory statements. For now, from the report I've read in this post, I believe Morgan Stanley thinks bitcoin is a buy.
Bitcoin is starting to rise and if anyone is left out in buying the dip, they might never get a chance of seeing bitcoin lower than the rate it is now.
Let's go all in, with what you can afford to lose, the prices are about to hit high, and no one obviously wants to look on when parties celebrating bitcoin's rising kick off.
The stock markets and bitcoin go most of the times in the same way because the investors don´t care about the volatility and all of that fights about cryptocurrencies. When the investors see good news and want to buy, to make some money, the prices rise in both markets (it´s how economics work).
I thinks we can expect behaviors like that in the future too.
Probably with more impact in the crypto markets than in the stock markets.
I have a little conspiracy theory in my head:
crypto world + Bitcoin gives massive volatility, and price fluctuations on almost daily basis. This is excellent for traders. Also the fees are way way smaller than traditional stocks.
Traditional stock brokers, traders are leaving to crypto trading, for the reasons I mentioned in 1st point, but also they are leaving the companies, so there are gaps appearing. That's why in the future 3-6 months, we might see bigger and bigger stocks' price fluctuations, in traditional stocks. Maybe even trading fees reductions all over industry (Robinhood 0 fee, brings a massive change). So traditional banks JP Morgan, etc will try to "get back" those traders who left to trade crypto... In other words they will try to stay competitive.
It is only my opinion.
My question is why would they both peak at the same time and dip at the same time?
It's two different investment classes, I don't know a ton of people who are in crypto, but pretty much everyone I know has some skin in stocks. So I guess I don't see the correlation. Can anyone clear this up for me, what factors are playing a role in both? They seem like they should be competing assets in some situations, but this is making it seem like they basically go together.
To be honest, MS knows their stuff. I have read multiple analysis of theirs and they have some pretty solid team and arguments. Unlike GS, these guys really move markets :) As far as the "tandem", too little data to determine.
You have picked up on a problem satoshi and many others haven't solved. They, possibly being with little economics education, specifically designed a deflationary currency.
The funny part is watching Roger Ver and Charlie Lee push their own coins for utility use for daily payments in life. Charlie does not understand economics and Ver is simply a moron.
Anyway, bitcoin is still seeking price discovery of a larger magnitude and will continue to be volatile until that is resolved. My best guess (emphasis on guess) is that price discovery will be at much higher prices. Using your example, it will be a fraction of a bitcoin to make such purchases. At some point it will end and I would surmise government will step in, with blessing of certain corporations, for a national crypto. So maybe the conspiracy is true .
thanks for share @zer0hedge
Especially when the reason for the lower prices was because of China and Korea blocking exchanges..
Bitcoin is still seeking price discovery of a larger magnitude and will continue to be volatile until that is resolved. My best guess (emphasis on guess) is that price discovery will be at much higher prices. Using your example, it will be a fraction of a bitcoin to make such purchases. At some point it will end and I would surmise government will step in, with blessing of certain corporations, for a national crypto. So maybe the conspiracy is true .
Thanks @zer0hedge for your updates.
Interesting article!
Checkout @cryptobroye for more bitcoin info and analysis. Im sure there's a lot we can learn from each other!
nice @zer0hedge
Great analysis of crypto.your learning post is so great,.thanks for share. @zer0hedge
I'm very curious about the price of Bitcoin. It would have been better if I got help from a good consultant.
Good information, I like this post
Thanks @zer0hedge Follow and upvote me @madyalhas
I see some patterns too, when cryptomarket gets so much capital almost every month in and in! Hard to say yet, but some stocks in Dow Jones, or other world traditional markets, are getting cheaper and cheaper: smart money leaving? and going to bigger ROI?
This year is specially exciting because, people started talking on the streets about Bitcoin, also media escalates it almost on the daily basis: everyone is chasing hot news. But the point is: real good projects have chance now to grow very fast, attract lots of capital and good talent (developers), meanwhile "shitty" scams will have to die. Which ones are which just time will show. Hope 6-12 months will be enough, and those who are just making a project, because of hype, will get noticed and announced publicly.
I still watch both sides of the equasion: CNBC, Bloomberg + Youtubers boradcasting on cryptos. I have too much money invested in traditional stocks.... not to follow the trends. But I also invest into new technologies and projects, with hope that some of them will evolve into something, that will change the world for good!
That's an interesting observation. The patterns are certainly coincidental to some extent but that is just about it. I am not sure if I understand the logic for this particular observation being a pattern or just a fluke.
@zer0hedge - Would love some more insight into this and thanks for the update.
@steemcleaners