According to Barry Bannister, Managing Director and Chief Stock Strategist of Stifel, the recent weakness in bitcoin may indicate that the S&P 500 index will soon see an adjustment, as these two assets often trade in sync.

According to the financial news app, Zhixun Finance, as of Monday, bitcoin has been in a downtrend for six out of the past seven days. According to Dow Jones market data, since hitting a historic high of $73,798 in March of this year, Bitcoin has fallen by more than 23%, but has still risen by 33% so far this year.

On the other hand, the S&P 500 index is heading towards a new historic closing record. According to Dow Jones market data, the index has risen for five consecutive days, the longest winning streak since it rose for six consecutive days from January 25.

However, Bannister pointed out that the historically strong correlation between bitcoin and stocks may mean that the S&P 500 index is about to experience a summer adjustment.

Since the outbreak of the COVID-19 pandemic in 2020, cryptos and stocks have shown relatively strong correlation since the US Federal Reserve injected liquidity into the market.

Bannister said, "Bitcoin's price is driven by Fed liquidity. Every dovish turn in the past 13 years has marked a sharp rise in Bitcoin. As an interest-free asset, Bitcoin performs well in low interest and ample liquidity environments."

He pointed out that bitcoin is a good indicator of speculative interest and changes in Fed policies, as it trades 24/7 and is highly volatile.

As bitcoin falls, Bannister has a bearish outlook on stocks and expects the S&P 500 index to soon experience an adjustment. Adjustments typically refer to a drop of more than 10% but less than 20% from recent highs.

Despite the expectation of two rate cuts before the end of this year by federal fund futures traders starting in September, Bannister takes a bearish view. He expects core personal consumption expenditure (PCE) data to exceed expectations in late summer and early fall, which would make a rate cut in September unlikely. Due to possible inflation, the chance of a rate cut in December may also be small.

Jonathan Krinsky, Chief Market Technician, also emphasized the risks facing stocks, as bitcoin has fallen more than 25% since early June. In a report on Sunday, Krinsky wrote that "Bitcoin has been a good leading indicator for the Nasdaq 100 index for years."

Will Rhind, Founder and CEO of investment company GraniteShares, holds a different view. He is optimistic about rate cuts this year and expects large tech stocks to continue to drive the stock market up until the end of the year. Rhind pointed out that these stocks have strong fundamentals, and potential rate cuts may boost their valuations.

Since tech stocks and bitcoin often trade in sync, Rhind said that despite recent weakness in bitcoin, he expects bitcoin to perform strongly by the end of the year. Rhind said: "We are in a risk appetite market, and there is no reason to believe that bitcoin will behave differently."