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Gundlach says bitcoin leads stock market movements

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Bitcoin is now being used a stock market indicator according to influential investor Jeffrey Gundlach adding that this is hardly just a “gut feeling” given the recent price 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 this week,” Gundlach, known as Wall Street’s “Bond King,” said in an interview. “Bitcoin keeps leading.”

For months, Gundlach, who oversees $119 billion at DoubleLine Capital, has asserted that 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.

 On Monday, Gundlach added that bitcoin carries so much predictive power “because it was the poster child of the speculative mood late last year.”

Bitcoin peaked during 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, it has been on a steady decline but edged back on Monday at around $6,953.

“That (December) crash means the speculative mood got exhausted,” he said. “The hip bone is connected to the thigh bone.”

Gundlach said bitcoin’s price went vertical starting around mid-September. The S&P 500 Index accelerated to the upside at exactly the same time, he said. “Bitcoin mania was reached in mid-December and it promptly started to crash.”

The S&P frenzy, he said, continued on to Jan. 26 but “the bitcoin crash was shouting that the speculative mania of the social mood had already passed. Then the S&P collapsed, joining Bitcoin in gear on the downside.”

“It is all tied together, obviously,” Gundlach said.

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