Stock Market Rally Fails to Boost Bitcoin as Correction Looms

Cowen notes that the S&P 500's advance to around 7,750 is consistent with previous U.S. midterm election years, where equities continued setting records through August or September before entering a meaningful correction.

The stock market could remain bullish for several more weeks, but Cowen expects the risk of a correction to increase from mid-August through September, particularly due to the Federal Reserve's meeting on Sept 16. A hike in interest rates could pressure risk assets by signaling that the previous easing cycle has ended.

The continued strength in the U.S. dollar could create an additional headwind for stocks and cryptocurrencies later in the year.

Cowen believes Bitcoin could establish its market-cycle bottom based on the S&P 500's performance, particularly since Bitcoin historically reached its final bear-market low during the second major equity correction of previous midterm years. In 2018, Bitcoin held support near $6,000 for most of the year and only broke down after the stock market entered its second correction.