Investors should view the historic pullback in stocks and bitcoin as a lesson on the dangers of overconfidence, according to market watcher Paul Hickey.
Hickey, co-founder of independent research firm Bespoke Investment Group, cites dangerously high optimism as a chief reason for the market turmoil.
"You could look at the big run-up we've seen in bitcoin, and just highlight that as another example of overall consumer and investor enthusiasm," he said Wednesday on CNBC's "Trading Nation." "In a strong market, people tend to take more risks and move into some riskier assets."
In the months leading up to the stock market's free-fall, Hickey observed more and more investors acting as if they were entitled to uncharacteristic gains. It came as stocks were breaking record after record â until last Friday's tumble.
Hickey contends the markets were ripe for a sell-off, which was sparked by converging factors including worries that rising wages will spur higher interest rates, pension fund re-balancing and short volatility ETFs blowing up.
He doesn't buy the notion that the markets are broken. Hickey, who views the sell-off as a buying opportunity, also blames the plunge on a volatility shock sparked by a long period of calmness.
"It seemed abnormal," he said. "But compared to other periods, we've seen these types of pullbacks and big spikes in volatility before."
As violent as it became, he sees the volatility jump as a short-term challenge.
"It's more of just a reality check for investors," Hickey said. "[They] almost feel like 5 percent monthly gains are a God-given right."
Cloud Giant Xunlei Claims Blockchain Advance With 'ThunderChain'
Xunlei, the NASDAQ-listed cloud network provider, has launched its proprietary blockchain platform, despite ongoing class actions over an alleged initial coin offering (ICO).
At a press event in Be
Taiwan Eyes November Deadline for Bitcoin AML Regulation
Taiwan aims to formally regulate bitcoin under anti-money laundering (AML) rules before the end of the year.
According to the Taiwan Central News Agency, Chiu Tai-san, the country's minister of jus
Bitcoin Bull Trap? Not So, Says Lesser-Known Price Indicator
Is the reversal of a lesser-known bitcoin price indicator signaling a bull trap?
That's the question being asked by Twitter's more expert crypto analysts after bitcoin's rise to $8,500 this week, a
JPMorgan Trial Puts Debt Issuance on a Blockchain
JPMorgan Chase has partnered with National Bank of Canada and other major firms to trial a blockchain platform aimed to improve the debt issuance process.
As reported by Reuters, the investment ban
Stellar Run: XLM, IOTA, ADA Spike in Good Week for Altcoins
Alternative cryptocurrencies shone bright this week, as the wider cryptocurrency market saw continued resurgence.
The total market capitalization of all cryptocurrencies rose 25 percent week-on-wee
LedgerX's Bitcoin Derivatives Trading Is Up 7X Since Launch
Bitcoin trading platform LedgerX has seen a sevenfold increase in volume in the six months following its launch of cryptocurrency derivatives.
Chief operating officer Juthica Chou told CoinDesk tha
Likely New York Fed president says bitcoin 'doesn't pass the basic test' for a currency
The central banker expected to be the next head of the New York Fed doesn't think much of bitcoin and other cryptocurrencies. "Cryptocurrency doesn't pass the basic test of what a currency should
Bitcoin Pyramid Scheme Amassed $20 Million in South Korea
Two men from South Korea have been sentenced for creating a bitcoin pyramid scheme that swindled some 20 billion Korean won ($20 million) from investors.
On April 19, a judge from Seoul's Incheon D