Investor John Hussman believes that we are on the brink of a stock market collapse. He argues that even a 50-65% market crash in this cycle is “somewhat optimistic”. What would such a slump mean for Bitcoin?
The US economy has seen the longest period of expansion in its history this month. Officially, this is now the longest time that their economy has gone through without a recession.
While this is reason to celebrate, such a fact should also give us cause for concern: is current growth sustainable?
According to some financial analysts, we could see a serious correction and, what is worse, a complete wiping out of almost all profits to date.
An ominous forecast for the 2020s
According to investor John Hussman, we have every reason to be concerned. He firmly believes that portfolio returns are “heading for the worst 12-year return in history”.
He points to the weakening internal metrics within the market and predicts that at best we could see a 50-65% decline in the stock market, which may have an impact on Bitcoin.
He strikes an alarming tone about what he believes to be the future fate of world markets. According to Hussman, we could see a crash that is equal to or even beyond that of 1929.
“At the current market levels, we expect the S&P 500 to have negative overall returns over the next 12-year period,” Hussman told Business Insider. He predicts a decade of negative equity returns.
Hussman claims his metrics successfully point to previous crashes, including technology stock crashes in the early 2000s. In April 2007, he also claimed that the S&P would lose around -40% and fall by -55% in the subsequent collapse in late 2007/08.
So he could still be on the right track.
What will Bitcoin do?
It has often been written that Bitcoin is a hedge against risk and a possible economic downturn. However, Bitcoin has never experienced a recession before – and there is no reason to really believe that it will rise to higher heights if one occurs.
For example, Fundstrat’s Tom Lee said on CNBC Money: Bitcoin tends to follow the S & P500. In fact, it seems clear: the higher the stocks rise, the higher Bitcoin will rise. The best years for the S & P500 were undoubtedly the best years for Bitcoin.
If previous trends can provide an outlook, a slump in the stock market as predicted by Hussman should also lead to a drop in the Bitcoin price.
That may not be what many in the crypto industry want to hear – but it is something we should consider as we move into the new decade.