Mon. Oct 19th, 2020

WhyLose.com

Training Traders Since 2002

Troubles for Bitcoin as Hedge Funds Bet Against Stock Market Winners

3 min read

Bitcoin faces the prospects of undergoing broader downside corrections as hedge funds rush to short stocks that surged impressively during the coronavirus pandemic.

According to the Financial Times, some fund managers have increased their bets against the shares linked to technology, home gym equipment, grocery retail, and healthcare. Tim Campbell of Singapore-based hedge fund Longlead Capital Partners, for instance, called these stocks “the COVID over-earners.”

The co-founder/chief investment officer noted that the current earnings trajectory of some pandemic winners appears unsustainable in the long-run. He predicted that they would return to the pre-coronavirus growth rate at some point.

Bitcoin and its positive correlation with the S&P 500, the Dow Jones, and the Nasdaq Composite during the pandemic. Source: DXY on TradingView.com

Analysts have already argued that estimating the actual value of stock market gainers seems complicated, especially amid an environment of ultra-low interest rates and massive central bank and government stimulus that have supported even the worst-looking stocks during the pandemic.

Andrew Sheets, the chief cross-asset strategist at Morgan Stanley, noted that technology – the year’s best performing sector – is at the forefront of facing the most significant declines. He told FT:

“If we’re successful in getting a vaccine and the market thinks 2021 looks more normal, investors may think ‘let me sell companies where it’s as good as it gets now and buy companies with more cyclical earnings’.”

Bitcoin

Bitcoin and the US stock market surged and corrected hand-in-hand amid the coronavirus pandemic.

Analysts noted that the Federal Reserve’s near-zero interest rates, coupled with its infinite bond-buying program, trimmed yields of the US government bonds. As a result, investors’ appet