The experienced trader and analyst Jason Shapiro reflected on Thursday’s sharp drop in Bitcoin (CRYPTO:BTC) and the stock market, warning against taking “aggressively long” positions in high-risk assets until the end of the year.
What happened
In a video posted on his official YouTube channel, Shapiro stated: “I’m going to say something that no one wants to say and no one wants to hear, and that is that I don’t think that, at least from now until the end of the year, is a good time to take aggressively long positions in risk assets.”
Shapiro acknowledged the recent all-time highs reached in both markets, but argued against taking long positions from a risk-reward perspective.
“It doesn’t seem right to me. It starts to feel too easy, and when it becomes too easy, that’s when it really starts to get difficult,” shared the experienced trader.
Shapiro also questioned the growing market consensus on a “Christmas Rally” and a subsequent pullback early in the new year.
“Well, who in their right mind is going to buy before Christmas if they think it’s going to go down in January?”
For the uninitiated, Shapiro is known for his contrarian approach, which means taking short positions during times of bullish euphoria and long during bearish sentiment.
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Why is it important
Shapiro’s bearish prediction comes amid a sharp pullback in both Bitcoin and Wall Street stocks.
While the world’s leading Cryptocurrency suffered a sudden crash to almost $92,000 after surpassing $100,000 just a day earlier, major indices such as the S&P 500 (ARCA:SPY) and the Nasdaq Composite (NASDAQ:QQQ), broke their record streak by falling 0.19% and 0.17%, respectively.
According to TradingView, Bitcoin’s Sharpe Ratio, a measure of risk-adjusted returns, was 6 at the time of writing. This implied that the investment in the cryptocurrency was generating positive returns above the risk-free rate.
Similarly, the Sharpe Ratio of the S&P 500 showed a reading of 1.13, indicating better risk-adjusted return potential.
Bitcoin price movement
At the time of writing, Bitcoin was trading at $97,678.87, declining 4.85% in the last 24 hours, according to data from Benzinga Pro. The S&P 500 fell 0.19% to close at 6,075.11 during the Thursday regular session.
Photo courtesy of Shutterstock
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