Traders May Rotate Into Bitcoin if UBS' Bearish US Stocks View Comes True

UBS Group AG has downgraded US equities to benchmark status, citing concerns about operational leverage, dollar depreciation risks, weak buyback yields, and high valuations according to UBS analysis. This move reflects growing uncertainty about the relative performance of US stocks compared to global markets, despite the rise of AI-driven sectors as reported. The bank has shifted its focus to emerging markets, where it maintains an overweight position according to UBS.

The downgrade comes amid a broader shift in institutional capital toward alternative assets. Bitcoin ETFs, for instance, recorded $506.5 million in inflows on February 26, the highest since early February according to data. BlackRock's iShares Bitcoin Trust (IBIT) led this flow, drawing $297.4 million in net inflows alone as reported. Bitcoin's price has also rebounded above $68,000, aligning with the renewed inflows according to market data.

Large institutional holders of Bitcoin are also taking precautionary measures. Deribit reported that open interest in long-term put options at $60,000 or below has reached $1.5 billion, indicating significant hedging activity according to Deribit. This suggests institutional investors are bracing for a potential sharp decline in Bitcoin prices after recent volatility as analysts note.

Why Did UBS Downgrade US Equities?

UBS' downgrade is rooted in several structural issues. The US stock market, while strong in absolute terms, has underperformed global markets in relative terms. This underperformance has been attributed to low operational leverage, weak buyback yields, and high valuations according to UBS. Additionally, the U.S. dollar's relative strength is seen as a headwind, with downside risks emerging amid global economic shifts as reported.

The bank's strategist Andrew Garthwaite noted that the US has experienced its largest drawdown against global markets in nearly 15 years according to UBS analysis. Despite the AI boom, this drawdown has not been reversed, contributing to the downgrade as UBS explains.

How Did the Market Respond to the Downgrade?

The market has responded with a degree of caution. Investors are rotating capital toward emerging markets and alternative assets such as Bitcoin according to market analysis. ETF inflows into Bitcoin have surged, with BlackRock's IBIT drawing the most attention as reported. This shift is being seen as a hedge against the uncertainty in US equities according to analysts.

Bitcoin's price has rebounded to $68,000, supported by ETF inflows according to market data. The market is closely watching whether this momentum can be sustained, particularly if UBS' bearish outlook for US equities materializes as analysts suggest.

What Are Analysts Watching Next?

Analysts are monitoring several key indicators. The first is whether US equities will continue their relative underperformance or if they can stage a recovery amid the AI boom according to UBS. The second is whether the strong ETF inflows into Bitcoin can continue to support the price above $68,000 as market data shows.

The third factor is the broader macroeconomic environment. Risks include regulatory changes and macro shocks that could impact both the US stock market and Bitcoin according to market analysis. Analysts are also watching how other financial institutions, like Citigroup, integrate Bitcoin into their services, which could further drive institutional adoption as reported.

The final area of focus is the hedging activity in Bitcoin markets. With $1.5 billion in open interest in long-term put options, the market is signaling deep concerns about a potential sharp decline in Bitcoin prices according to Deribit data. If these fears materialize, it could trigger a broader reassessment of risk across both equities and crypto markets as analysts warn.