DoubleLine's Gundlach Says Bitcoin Leads Stock Market MovementsDoubleLine's Gundlach Says Bitcoin Leads Stock Market Movements
Bitcoin has become the "lead horse" of risk assets and that its previous plunges have had a cascading effect on other risk assets including equities and high-yield junk bonds, Gundlach says.
April 2, 2018
By Jennifer Ablan
NEW YORK, April 2 (Reuters) - Bitcoin, the highly volatiledigital currency, is proving to be the new stock marketindicator, influential investor Jeffrey Gundlach said on Monday,adding that this is hardly just a "gut feeling" given the recentprice movements.
"Bitcoin closed at the low of the year last week, SPX(Standard & Poor's 500 Index) is now at the low of the year thisweek," Gundlach, known as Wall Street's "Bond King," toldReuters in an interview. "Bitcoin keeps leading."
For months, Gundlach, who oversees $119 billion atDoubleLine Capital, has asserted that bitcoin has become the"lead horse" of risk assets and that its previous plunges havehad a cascading effect on other risk assets including equitiesand high-yield junk bonds.
On Monday, Gundlach added that bitcoin carries so muchpredictive power "because it was the poster child of thespeculative mood late last year."
Bitcoin peaked in mid-December at just under$20,000. From December to early February it fell to around$6,600 then rebounded to $11,500 in early March. Since then, ithas been on a steady decline but edged back on Monday at around$6,953.
"That (December) crash means the speculative mood gotexhausted," he said. "The hip bone is connected to the thighbone."
Gundlach said bitcoin's price went vertical starting aroundmid-September. The S&P 500 Index accelerated to theupside at exactly the same time, he said. "Bitcoin mania wasreached in mid-December and it promptly started to crash."
The S&P frenzy, he said, continued on to Jan. 26 but "thebitcoin crash was shouting that the speculative mania of thesocial mood had already passed. Then the S&P collapsed, joiningBitcoin in gear on the downside."
But as the S&P was diving to its lows, bitcoin was alreadyrallying, Gundlach noted. As a result, the S&P found a bottomand subsequently the tech-heavy Nasdaq even crawled backto a new high, he said. "But as that new high was being made,bitcoin was back in bear-market mode. Soon after it was tanktime again for stocks.
"It is all tied together, obviously," Gundlach said.
In a January investor webcast, Gundlach said he believed theprice on bitcoin had hit its peak. “The high for bitcoin is in,”he said. “It’s just a thing that is out there, unproven. I havea theory that bitcoin is very different than what people think.People think that it is tremendously safe and anonymous andcan’t be hacked and all that stuff. I have feeling that it isthe opposite.
“I do not own bitcoin. This type of investment is very, verydifferent from my conservative DNA,” Gundlach said.(Reporting by Jennifer Ablan in New YorkEditing by Matthew Lewis)
