Could it be that the bitcoin price is currently too high for the macro environment we are in? The traditional financial markets seem to provide an important point of reference for this. The purpose of this macro update is to formulate a possible answer to this question.
Is Bitcoin Price Overvalued?
Bitcoin price is currently trading at $29,394, up more than 70 percent for 2023. Many analysts wonder how Bitcoin is doing this at a time when the US Federal Reserve is aggressively raising interest rates.
The answer to this question appears to lie in the solid US economy. Due to the interest rate hikes by the central bank, many analysts were already expecting a recession at this point.
There has been no recession so far, the labor market is still strong and the US economy continues to simmer. So much so that we are increasingly seeing reports of a “soft landing” for America in the media.
A soft landing means that the US Federal Reserve’s rate hikes can contain inflation without triggering a recession. However, the chart above shows that we saw a similar pattern in the media in 2000 (the DOTCOM bubble) and 2007 (the credit crunch).
In this respect, it is quite possible that the recession is yet to come and that the Bitcoin price is currently slightly overvalued.
Traditional markets and BTC
If you’ve been in the industry for any length of time, you’ve no doubt seen that the price of bitcoin is highly correlated with the performance of US tech stocks. So much so that many analysts argue that Bitcoin fundamentally trades like a tech stock. As tech markets rise, so does bitcoin and vice versa.
In this context, it might be interesting to take a look at the current valuation of technology stocks (US-Nasdaq). The Nasdaq price-to-sales ratio today is 4.5904, well above its historical average.
That would mean that the Nasdaq is currently overvalued. We’ve had a fantastic start to 2023, but can tech stocks and bitcoin hold out for the rest of the year? With the US Federal Reserve raising interest rates and the looming recession, this seems like a tough story.
