Key Takeaways
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Goldman Sachs warns the equity selloff may not be over.
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Bitcoin could face short-term pressure if risk-off intensifies.
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Long-term Bitcoin vs. gold debate is resurfacing.
U.S. stocks may face renewed selling pressure in the days ahead as trend-following funds and other strategies continue to cut exposure, according to Goldman Sachs — a development that could also weigh on Bitcoin and other crypto assets if broader risk appetite deteriorates.
Goldman’s trading desk said in a note to clients cited by Bloomberg that market stress remains elevated and liquidity conditions are thin, increasing the risk of continued volatility even after equities staged a rebound late last week.
Goldman said the S&P 500 has already breached a short-term level that triggers selling by Commodity Trading Advisers, systematic funds that adjust exposure based on price trends rather than fundamentals.
The bank estimates that a renewed decline could lead CTAs to sell roughly $33 billion of U.S. equities this week.
If the selloff deepens, Goldman’s models show as much as $80 billion of additional selling could be unlocked over the next month, Bloomberg reported.
Even if markets stabilize, the desk expects CTAs to remain net sellers.
Goldman projected these strategies could reduce equity exposure in both flat and rising scenarios, suggesting selling pressure may persist regardless of direction.
It said stress indicators have risen sharply, with its internal Panic Index recently approaching levels associated with extreme fear.
The bank also highlighted a shift in options dealer positioning toward “short gamma,” a setup that can exacerbate market moves by forcing dealers to buy into rallies and sell into declines.
While Goldman’s warning focused on equities, sustained volatility in U.S. stocks can often spill into crypto markets, which trade as high-risk assets during periods of macro stress.
If systematic selling accelerates and equity volatility rises further, Bitcoin could face pressure through portfolio deleveraging and declined risk-taking.
Thin liquidity and rising volatility can also amplify swings in digital assets, where leverage remains a key driver of short-term price action.
The prospect of prolonged market turbulence comes amid a revived debate over where investors may seek shelter if volatility persists, including whether Bitcoin can increasingly compete with gold.
Ark Invest founder Cathie Wood said recently that she would personally favor Bitcoin over gold in the current environment, arguing that the conditions that historically supported gold’s strongest rallies are not present today.
JPMorgan also highlighted changing dynamics between Bitcoin and gold, arguing that BTC’s risk-adjusted appeal has improved following gold’s rally and a rise in its volatility.
In a note this week, JPMorgan analysts said Bitcoin’s volatility relative to gold has fallen to a record low, improving BTC’s long-term risk-adjusted profile even as digital assets have weakened in recent weeks.
The bank said gold’s sharp outperformance since late last year, combined with increased volatility, has shifted the balance between the two assets, making Bitcoin appear more attractive on a relative basis.
JPMorgan added that selling pressure in crypto markets has remained relatively contained, with liquidation activity modest compared with prior downturns.
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Source: finance.yahoo.com
