Stocks and Bitcoins: Where do we go from here?

rds, the justification for prices having risen or fallen is easy: Excess quantities demanded pushed prices higher; excess quantities supplied pushed prices lower. The problem with predictions, however, is that of timing. Prices are influenced by myriad factors — often with opposing consequences — and it’s difficult to assess which factors will be overriding and when.

I’ve been thinking about this dichotomy largely with two markets in mind: The US equity market and the Bitcoin market. Both of these markets are down from previous highs. As of this writing, the S&P500 index has fallen by almost 16% from its peak in December of last year. The drop in the price of Bitcoin has been sharper. Bitcoin prices peaked in November 2021, with a price of $64,400. Today, it’s down by almost 50%.

Given the earlier history, it’s not out of the question that stock market values could fall by even as much as another 50 percent, but I expect few analysts to be anywhere near this pessimistic. It seems much more likely that while some further price declines could very well occur, we’re probably not all that far away from reaching a bottom. At the same time, the case for unbridled optimism seems tenuous, at best.

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