Also known as the Warren Buffett Indicator, the index saw its highest level in the last 20 years. The ratio calculated by dividing the Wilshire 5000 Index by the US Gross Domestic Product is currently 1.7, and this result is 70% above the index’s overall average. The fact that the index shows these levels indicates that the stock market is at a higher level than it should be. Whether this situation will benefit Bitcoin is also among the topics of interest.
With the effects of the pandemic lowering the US GDP, Fed liquidity is rapidly reaching new record levels, and it is not surprising that the Buffett Indicator has reached these levels. Tom Eassaye, founder of Sevens Report Research, also notes that this ratio, which is normally around 1, only rises to 1.3 when the beliefs that stocks are overvalued. Whether this state of the indicator definitely signals a short-term overvaluation on behalf of stocks is uncertain. But for most market followers and analysts, this ratio is a harbinger of stocks in overvalued territory and the collapse of the US stock market.
The indicator has not seen such a rise since the last ‘dot com’ bubble burst in 2000; At that time, the rate was up to 1.7. But State Street Global Investors Deputy CIO Lori Heinel told Yahoo Finance that the current market is different from the ‘dot com’ bubble, referring to the fact that companies like Apple are showing active and productive returns, and that the end might not be the same as there.
What Is The Status Of Bitcoin Going?
Market commentators say that with a sudden drop in the US stock market, Bitcoin could attract enormous interest. The increasingly worsening correlation between Bitcoin (BTC) and the US stock market strengthens the bullish situation for BTC.
Tom Eassaye warns investors to be cautious about long-term savings and investments such as real estate, while signaling that this high rate could bring about a collapse. Eassaye says that such an effect cannot stop an inflationary effect on assets.
Based on these statements, investment experts who suggest that it makes sense for investors to invest in assets such as Bitcoin, also state that BTC is correlated with gold and the S&P 500 index. With the dollar depreciation at the end of July, BTC rose along with gold.
Famous writer and businessman Robert Kiyosaki also thinks that the collapse in US banks, which Warren Buffett signaled to sell his bank shares, is imminent. He argued that investments should be made in BTC.
In general, there are opinions that with a potential decrease in the US stock market, the rate of increase of Bitcoin can be strengthened. Some institutions began to see Bitcoin as a legitimate investment, and the situation was intensified by the increase in institutional BTC purchases.