The ‘Buffett Indicator‘ divides Wilshire 5000 Index by the GDP of the U.S. Its historical average value has been 1, and before the dot-com bubble, it hovered at 1.71. Currently, the Buffett Indicator is reportedly at 1.7, signalling that the stock market is highly overvalued. This is hinting that the United States’ stock market is currently at dot-com bubble levels.
A week ago, Warren Buffett-led Berkshire Hathaway invested in Barrick Gold, the world’s second-biggest precious metal miner. According to some analysts, this could benefit Bitcoin (BTC) in the long term as it coincides with this stock market bubble alarm, and if the US stock market shows similar behaviour, Bitcoin could see price action.
As per Tom Essaye, the founder of Sevens Report Research, when indicator hits 1.3, stocks fall in the category of fundamentally overvalued. So the current level of 1.7 indicates that if the trend reverses, there could be a potential downtrend in the market. In the past four months, Bitcoin has shown some correlation with the S&P 500 and gold, and since July, it has demonstrated more correlation with gold.