Worse Than the Dot-Com Bubble... Cowen: "Bitcoin Faces a Crash Unlike Anything Millennials and Gen Z Have Seen"

▲ Bitcoin (BTC), market crash / ChatGPT-generated image

Claims have emerged that the cryptocurrency market and the broader macroeconomy have passed through an abnormal overheating phase and are now entering the final stage of the business cycle.

Benjamin Cowen, founder of IntoTheCryptoverse and a veteran trader, said in a video released on his YouTube channel on Feb. 22 that the current market has formed a bubble far exceeding the levels seen during the dot-com bubble of the 2000s. Cowen presented his own calculation formula—dividing the S&P 500 index by the square of the unemployment rate and then multiplying by inflation and interest rates—to visualize the extent of overheating in the business cycle. He noted that the pace of expansion in this cycle, driven by liquidity injections and near-zero interest rate policies, is historically unprecedented.

Cowen warned that as liquidity dries up, classic pre-bear market signals are emerging, with capital moving from the upper end of the risk curve to the lower end. Bitcoin (BTC), positioned higher on the risk curve than equities, has already begun to show weakness, and this trend is likely to eventually spill over into traditional stock markets.

“Bitcoin’s nearly year-long sideways movement and gradual loss of strength could serve as a leading indicator of what lies ahead for the stock market,” Cowen said. Historical data show that major market corrections have consistently followed a flow of capital from high-risk altcoins to Bitcoin, and then from Bitcoin to gold and cash.

The energy sector and unemployment indicators are also signaling the end of the cycle. XLE, which represents energy stocks, typically maintains strength until just before a recession and then plunges at the final stage. Currently, energy stocks are rising while the S&P 500 remains stagnant, a pattern that has repeated itself. Cowen stressed that cracks in the labor market should be taken seriously. When the unemployment rate begins to surge nonlinearly, it triggers a vicious cycle of declining corporate earnings and additional layoffs, potentially leading to a hard landing. A sharp decline in energy demand during the closing phase of the business cycle is expected to mark the true onset of crisis.

Cowen advised that millennials, who have yet to experience a severe hard landing, should increase their cash holdings. With the S&P 500 hovering near its all-time highs, he described the current period as the last opportunity to reassess portfolios and hedge risk assets with safer ones. “Every cycle ultimately ends with a recession and undergoes a process of valuation normalization,” Cowen said, predicting that this cycle will likely come to an end within the next two to three years.

In the final stage of the business cycle, market uncertainty peaks and volatility intensifies. Rather than reacting to short-term rebounds, investors are closely monitoring macroeconomic trends and capital flows to formulate response strategies. Proactive risk management will be essential to seize buying opportunities at lower prices in the next cycle following a hard landing.

*Disclaimer: This article is for investment reference purposes only and we are not responsible for any investment losses incurred based on this information. The content should be interpreted for informational purposes only.*