Bitcoin is the ‘most crowded’ trade: a survey

Big money managers say too many investors have piled into the red-hot cryptocurrency bitcoin at the beginning of 2021, according to a Bank of America survey conducted in January.

“Long bitcoin is jumping to the top with 36% of FMS investors saying it’s the most tech-savvy ‘crowded trade’ for the first time since October ’19,” wrote Michael Hartnett, chief investment strategist at Bank of America.

Long technology (31%), short US dollars (23%) and long corporate bonds (4%) also made the list.

The North Carolina-based lender Charlotte surveyed 194 participants with $ 561 billion in assets under management between January 8 and January 14.

The survey was conducted in the week after bitcoin closed an all-time high of $ 40,797 on January 7, up 39% so far. Bitcoin had soared 871% since early 2020, a rally that raised its market capitalization to as much as $ 770 billion before the cryptocurrency settled at $ 36,069 on Tuesday.

While respondents were concerned that bitcoin was the “most crowded” trade, bullish investor sentiments point to an “imminent” correction risk for the stock market, according to Hartnett.

Cash levels fell to 3.9%, the lowest since March 2013 as the equity allocation peaked at two years. The company’s Bull & Bear sits at 7.1, just below the “sell signal.”

Catalysts for correction include peak vaccine / virus growth or peak liquidity at higher dollar / rates.

Investors were still optimistic about the global economy in the midst of their calls for a correction.

A net 73% of respondents said that the global economy was in an early cycle compared to a net 9% who said it was still in recession.

In addition, 92% net of FMS investors expect higher inflation over the next year.

Favorite contrarian trades among investors include long Treasury bills – short goods, long emerging markets without the US dollar and long staples for consumers – short short caps.