Stocks, Bitcoin could see all gains since 2020 wiped out by year-end, says Gareth Soloway
(Kitco News) – Stocks, crypto and gold fell on Friday as the US dollar climbed amid growing recession fears.
On Friday, the S&P 500 fell 1.7% at market close, Bitcoin fell 1.1%, and gold fell 1.7%.
The pain is not yet over for risk assets, said Gareth Soloway, market strategist for InTheMoneyStocks.com and co-founder and president, Verified Investing Education.
On Ethereum, the long-awaited merger that took place on September 15 was not enough to boost prices, as many crypto investors expected, Soloway noted.
“The key here is to just understand what type of market we’re in, and when you’re in a bear market, it takes a lot to make the price go up because people are scared. If you’re in a bull market you can have the smallest piece of news and the price will tear up. It might even be news that’s not relevant and we’ve seen stocks like GameStop, AMC, all these things just go to the moon. But the problem is we’re in a bear market and in a bear market people need real value, they need to know something is changing immediately. The merger doesn’t. Yes, in the long term it’s probably great for Ethereum, but in the short term, what is everyone focusing on? The Federal Reserve, interest rates, U.S. dollar, the economy and all those things are just crushing risk assets right now,” Soloway told Kitco News Anchor David Lin.
Cryptocurrencies
Soloway said cryptocurrencies, especially the larger coins like Bitcoin and Ethereum, will continue to trade in tandem with the stock markets. He maintains his $600 downside target for Ethereum.
On Bitcoin, Soloway’s fundamental downside target is between $12,000 to $13,000. The last time Bitcoin saw these levels was July 2020.
“If the dollar continues to strengthen, and the Fed seems to want to make sure it does, then you’re going to break this $18,000 to $19,000 level, and the next stop is $12,000 to $13,000,” he said. “That’s my best case.”
Bitcoin last traded at $19,215. Soloway said a further decline beyond the $12,000 support level could happen if economic conditions deteriorate further.
“Worst case, you have to look back to the doc com era when Amazon fell 95% during that collapse, and if that’s what crypto is going through, you could be looking at a $3,500 worst case scenario target on Bitcoin,” he said.
Stock market
U.S. stock market indexes are heading toward their pre-pandemic highs, Soloway said, even after posting their worst one-day drop since June 2020 on Sept. 13, falling another 7% after that.
“The markets are going down. I think we are oversold in the short term, so it wouldn’t shock me to see a rally next week, but at the same time, I still think that the covid highs just before March 2020, that have the target written all over them by the end of the year, it’s about 3,385,” he said.
Soloway’s comments come as Goldman Sachs on Friday cut its annual forecast for the S&P 500 to 3,600 points, or about 16% downside from today’s level.
Gold price outlook
On gold, Soloway said Friday’s selloff can be attributed to a case of panic selling across all asset classes bringing everything together.
“When COVID hit in 2020, you saw risk assets sell off, you saw gold sell off, you saw crypto sell off. And then, there’s a point where you start approaching a bounce in the markets, and this could be any market, where people are just throwing everything out the window. And I think that’s what we’re seeing today. You have interest rates that just scare people, the dollar keeps tearing up, it scares people, and people are just saying “you know what, I’ll end everything at this point and I’ll ask questions later”. Now we’ll probably see things like gold start to recover faster like we did during the COVID collapse, but that’s what’s happening right now,” he said.
Soloway noted that gold will continue to be the outperforming asset this year compared to stocks and cryptocurrencies, and the odds are that gold prices will rise from current levels by the end of the year.
For more information on what’s driving the current market selloff, watch the video above.
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