Bitcoin may be behaving more like a tech stock in recent months, but crypto hardliners are promising things don’t always turn out that way.
Bitcoin may be behaving more like a tech stock in recent months, but crypto hardliners are promising things don’t always turn out that way.
The world’s largest cryptocurrency fell as much as 6.1% on Tuesday to trade below $38,000, its lowest level since mid-March, a move that closely mirrors the drop in the stock market. US, where tech stocks lost nearly 4%. But Bitcoin doesn’t always work this way – soon it will start charting its own path, or so promises Michael Saylor of MicroStrategy Inc.
Traders right now think this coin is correlated with risky assets, so if they are selling risk, they are also selling Bitcoin. But, “it’s clearly not a tech stock — it’s really the ultimate risk-mitigation asset,” Saylor said in an interview with CNBC.
“Over time, in four, five, six, seven years, everyone envisions it. But right now, traders and technologists control the Bitcoin trading market and that is a function of the battle between them and the mood in the market,” he said.
Bitcoin’s inability to map its own path in recent months is a somewhat awkward reality in the crypto space – the coin has been offered for years as an unrelated asset, a something that any government has no eye on and is unlikely to be swayed by external forces or factors.
But both tech stocks and Bitcoin have seen big swings this year as the Federal Reserve becomes less capable as part of its fight against inflation. That means the coin can largely be seen rising or falling in the same fashion as stocks on any given day. The coin’s 90-day correlation and the tech-heavy Nasdaq 100 currently stand above 0.60, among the highest readings on record. (A factor of 1 means the contents are moving in a lock step, while minus-1 will show they are moving in opposite directions.)
“When risk appetite is strongest, that’s when you see a lot of activity in the crypto space, but right now, risk appetite,” said Shawn Cruz, lead trading strategist at TD Ameritrade. is popping up,” Shawn Cruz, lead trading strategist at TD Ameritrade, said by phone.
But crypto investors are feeling hopeful it might break the habit. According to Tom Dunleavy at Messari, despite the bleak outlook for the U.S. economy later this year, there is a proven case that cryptocurrencies can do well, according to Tom Dunleavy at Messari.
Inflation could stabilize at higher levels, “breaking the negative correlation for traditional safe-haven assets with equity markets,” he wrote in a post titled “Thesis.” remove the coupling”. New alternatives need to be considered under such a scenario. He predicts the idea of Bitcoin-as-a-better-version-of-gold will, among other things, be further strengthened and the coin’s correlation with the stock market will decrease.
“It would come as no surprise to see a new 60/40 ratio in the coming years of 60/30/10 for stocks, bonds and cryptocurrencies,” he said.
Meanwhile, Bitcoin investors are looking at an 18% loss this year, while the Nasdaq 100 has dropped 20%.
And they are not the only crypto investors likely to seek solace following Tuesday’s slide. Dogecoin drops 10%, one day after 20% increase. Ether is down 5.7% and Avalanche is down 5%.
