The spot bitcoin ETF narrative favors a rally in the largest cryptocurrency and other digital assets. However, potential fallout from overstretched bullish positioning in technology stocks may put on the brakes.
“Long big tech,” or bullish bets on technology companies with large market capitalization, is the most crowded trade, according to Bank of America’s (BofA) October survey of fund managers released Tuesday.
BofA surveyed 295 market participants with a total of $736 billion in assets under management. The survey was conducted from Oct 6-12.
A crowded trade is the preferred by many investors and often results complacency about the position’s ability to generate profits. In such cases, even a slight dent in investor confidence can lead to sudden, large-scale unwinding of positions and disruptive market action.
Such an event concerning the crowded long-big-tech trade may have a negative impact on the crypto market, especially on ether (ETH), which many consider analogous to a technology stock. Bitcoin (BTC), in contrast, has been portrayed as digital gold.
“According to the latest Bank of America Fund Manager Survey, the most crowded trade at the moment is still ‘long big tech.’ This has repercussions for the crypto market, not necessarily good ones,” Noelle Acheson, author of the popular Crypto Is Macro Now newsletter, said in Thursday’s edition.
“The most crowded trade is usually a euphemism for ‘the most overvalued,’ which implies that Big Tech is the category most likely to suffer a sharp correction,” Acheson added.
Bitcoin’s positive correlation with Wall Street’s tech-heavy Nasdaq index has weakened in recent months, with the 90-day correlation coefficient currently at 0.3, down from 0.8 in the second quarter. Ether’s 90-day correlation is 0.5, according to charting platform TradingView.