Warren Buffett's recent moves to reduce exposure to equities and increase cash reserves have caused concerns about a potential stock market crash. The billionaire's Berkshire Hathaway has offloaded $13.30 billion in equities while increasing exposure to cash and U.S. Treasuries in Q1 2023, suggesting he is preparing for a potential collapse in risk-on asset prices.
Bitcoin investors are also wondering if they should brace for impact, given the cryptocurrency's strong correlation with equities. BTC has been up about 70% in 2023 so far, compared to a 20% increase for the stock index. However, Bloomberg Intelligence analyst Mike McGlone suggests that Bitcoin's price could be the leading indicator for a stock market crash, meaning BTC could pace declines for risk assets.
Buffett's risk-off strategy, combined with Bitcoin's high correlation with the Nasdaq, suggests that BTC investors should prepare for potential downside risks. The possibility of a global recession poses a risk to Bitcoin, as its 100-week correlation with the Nasdaq has reached its highest level of about 0.42%.
Traders should keep a close eye on the U.S. consumer price index report and the Fed's rate decisions in the coming months, as these factors could significantly impact Bitcoin's price trajectory. Economists surveyed by Bloomberg predict core CPI to remain unchanged at around 5%, implying more rate hikes ahead. However, Fed funds futures data currently suggests that at least five rate cuts between May 2023 and January 2024 are likely, which may undermine Buffett's risk-off strategy.
In the short term, BTC's price has declined roughly 6% over the past week, trading as low as $27,350 on May 9. This has brought BTC's price below its 50-day exponential moving average (50-day EMA) near $27,950. Bitcoin bears are now targeting $27,000 as the next downside level based on its recent history.
Investors should conduct their own research and be prepared for potential market fluctuations. A decisive break below the $27,000 support, primarily in the event of further rate hikes, could pull down BTC/USD to its 200-day EMA near $24,600, amounting to a 10% drop by June. Conversely, a rebound from $27,000 increases the possibility of BTC price retesting $30,000 as resistance and resuming its uptrend from the past few months.
