Is THIS the signal that Bitcoin and stocks have reached their peak?

For the first time since 2000, cash returns on paper better than shares. The profits of the S&P 500 companies for the coming months are lower than the yield on 3-month US government bonds. Historically, that is a signal that the market is at its peak.

Should we worry about stock market and Bitcoin price drops?

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Investors choose cash

Investors now hold a total of $6 trillion in cash in money market funds. These are funds that invest in US government bonds with a short term (for example 3 months), which means they fall within the definition of “cash” because there is little maturity risk.

For example, a government bond with a term of 10 years is much more sensitive to interest rate changes than a bond with a term of 3 months.

In just 12 months, the amount of capital in money market funds has increased from $5 to $6 trillion. At the end of the 1990s, the same increase lasted 5 years (!).

Usually a “run on cash” accompanies global financial crises, recessions and we saw it before the pandemic as well. Should we still worry about price drops?

That goes very much against the sentiment and feeling that currently prevails around Bitcoin.

What does this mean for the Bitcoin price?

First of all, it is important to know that there are always graphs that point towards a crash. In that respect, this data is not immediately a signal to sell everything and secure the profits made in recent months.

This does not alter the fact that the Bitcoin price has already risen by 47 percent this year and the sentiment with a score of 80/100 for the Fear & Greed Index points to extreme greed for Bitcoin.

We’re at a point in the cycle where it feels like you can never have enough Bitcoin. Usually that is a signal to trade against your feelings and sell some Bitcoin, but that is difficult.

Especially because the Spot Bitcoin ETFs perform so well. After all, who can tell you that things will stop there and Bitcoin will start a correction from here, only to resume its increases later in the year?

Nobody knows that and that makes it so difficult to make these kinds of decisions. Personally, I just stick to my weekly purchases when it comes to Bitcoin. If the price drops, so be it.

My view is that it is practically impossible to predict short-term price movements. There are good arguments for both camps, although my feeling is in favor of a correction. So I’m not going to act on that.

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