Bitcoin’s monster rally could be heading straight into a wall. That’s the warning coming from Piper Sandler this week, as chief investment strategist Michael Kantrowitz told investors to start locking in gains.
In a note published Tuesday, Michael said the firm is advising clients to take profits on positions that have surged the most since early April.
The warning comes as markets move from pricing in a potential inflation-fueled recession to expecting a so-called “Goldilocks” environment, where growth isn’t too hot or too cold.
According to Piper Sandler, the stocks sitting in the most dangerous spot right now are high-beta, low-quality names. Michael said they’ve enjoyed “huge multiple expansion without any improvement in the earnings outlook.”
And Bitcoin is not exempt from the risks piling up. In that same note, he pointed out that there’s still a “very tight directional correlation [with] equity market risk,” and warned that “if we do get a sell-off in risk on assets, for any macro risk that gets priced in, Bitcoin would likely decline as well over the near term.”
Tight equity correlation adds pressure on Bitcoin ahead of August
Since bottoming out on April 9, Bitcoin has returned 54%, hitting an all-time high just last week. That jump has been powered by heavy inflows from institutional players through Bitcoin ETFs and some corporate treasuries diving in.
In the same period, the S&P 500 only gained about half as much. Despite its recent maturity and lower volatility this year, the crypto still tends to fall when stock market panic sets in.
One clear example came earlier this year. On April 3, just after President Donald Trump announced sweeping tariffs, the S&P dropped 4%. Bitcoin fell 5%. The numbers were smaller than in previous cycles, but the pattern remains the same. When markets freak out, Bitcoin moves down with them.
Michael said the firm sees little risk being priced in ahead of the August 1 tariff deadline, but warned that a surprise decision could derail the market’s calm. He added that the firm expects “modestly higher consumer price index readings in the next three to four months,” which could mess with investor expectations around falling interest rates.
If inflation does pick up and rate cut hopes start to fade, traders could start dumping their riskiest assets, including Bitcoin.
There’s also the calendar to worry about. August is usually a weak month for both crypto and stocks. Volumes fall during summer, and thinner trading can turn small sell-offs into bigger drops. Bitcoin has shown less extreme moves this year, but that doesn’t mean it’s immune to sharp downside when risk-off sentiment hits.
To be clear, Michael said this isn’t a full bearish stance on U.S. stocks. The call is about risk management. “More of a contrarian and tactical call for risk management rather than a bearish call on U.S. equities,” he wrote.
Michael explained that valuations are stretched, but earnings are still expected to push equities higher, just not with the same kind of speculative names leading the way. “While valuations are expensive, we expect earnings to continue to propel equities higher, albeit with less speculative leadership.”
