Bitcoin’s surge signals potential market ‘overshoot,’ BofA strategist warns

With Bitcoin briefly surpassing $100,000 and the S&P 500 recording its best year since 2019, Bank of America’s strategist is warning of a potential market overshoot.

U.S. stocks and cryptocurrencies are showing signs of overheating, with Bank of America Corp.’s Michael Hartnett warning of a potential “overshoot” in early 2025, Bloomberg reported.

The S&P 500’s price-to-book ratio rises to 5.3 times in 2024, approaching the peak of 5.5 seen during the dot-com bubble in March 2000. If the index approaches 6,666 points (about 10% above current levels), the rally could become overextended, Hartnett said. However, despite this, the report states that the bank’s bull-bear indicator does not show any signs of excessive optimism among global investors.

The S&P 500 has gained nearly 27% this year, which looks to be its best year since 2019. In terms of Bitcoin (BTC), Trump’s support for crypto increased optimism and gave confidence to investors seeking returns on risky assets, which helped the rally. Bitcoin passed $100,000 earlier this week. Hartnett stated that Bitcoin is now the 11th largest economy in the world, with a market value exceeding $2 trillion.

The correction potential is not only flagged by traditional market pundits. Mike Novogratz, president of digital crypto bank Galaxy Digital, also expressed caution about Bitcoin’s rise. He warned that the crypto community is “sensitive to the gills and so there will be a correction,” adding that leveraged stocks like MicroStrategy could also experience significant declines.

Placeholder partner Chris Burniske also calls for a cautious approach, advising investors to balance optimism and realism to avoid overestimating market targets. Reflecting on past cycles, Burniske warned that Bitcoin’s brief rise above $100,000 may not be sustainable in the short term. He noted the 2021 bull market where inflated expectations fell short and Bitcoin was capped at $70,000 instead of the expected $100,000.