Bitcoin's rocky road to becoming a risk-off asset: analysts investigate

2 years ago

May 5th was a bloodbath for accepted and cryptocurrency markets. On the worst time of trading since 2020, Bitcoin (BTC) dropped implicit 7% portion the NASDAQ slipped implicit 5%.

Many hoped for capitulation successful the commercialized and crypto markets, and though the short-term outlook for Bitcoin looks weak, 1 expert and immoderate grounds would suggest that Bitcoin is inactive connected people to becoming a risk-off asset.

Markets are by nary means maths-based oregon infallible, but a risk-off plus describes an plus that performs well–or is an plus that investors flock to–when wide marketplace sentiment wanes.

Government bonds are risk-off assets; conversely, tech stocks and cryptocurrencies are considered risk-on assets. Risk-on assets execute good erstwhile the wide “mood” successful the marketplace is up and erstwhile the United States Federal Reserve isn’t hiking involvement rates.

Nonetheless, 1 Bloomberg expert shared an absorbing graph describing “adoption, maturation and Bitcoin beating equities,” implying that Bitcoin whitethorn yet beryllium showing its colors arsenic a harmless harbor during troubled waters.

The graph shows that volatility successful Bitcoin and the show of Bitcoin is outcompeting that of the Nasdaq 100 banal index:

Crucially, Mike McGlone explained that “the crypto marketplace astatine the commencement of May appears arsenic a nascent gyration successful fintech and money.”

“The information that the world’s astir fluid, 24/7 trading conveyance — Bitcoin — was down lone astir 15% successful 2022 to May 3 vs. 20% for the Nasdaq 100 Stock Index whitethorn portend the crypto transitioning to a risk-off asset.”

Mike McGlone, the writer of the study interviewed with Cointelegraph successful January this year. McGlone suggested that the modulation of Bitcoin to go a risk-off plus “will propel it to $100K successful 2022.”

Crucially, helium described that “what’s happening to beforehand wealth and concern into the 21st period is unstoppable.”

To backmost up the argument, according to 1 illustration provided by InvestAnswers Youtube, implicit the past 90 days, Bitcoin is up 6% vs. the Nasdaq’s 12% lows:

Ultimately, Bitcoin has dilatory proved itself arsenic a store of value, or Gold 2.0 arsenic the Winkelvoss twins picture it. However, with the worsening macroeconomic backdrop, fashionable Youtuber Benjamin Cowen says that Bitcoin whitethorn not deed $100,000 this twelvemonth successful the existent “risk-off” environment–not “until ostentation is nether control.”

Resultantly, it whitethorn inactive beryllium a tad prescient to telephone Bitcoin a “risk-off” asset, particularly arsenic it wallows successful the mid $30,000s.

That said, determination are a mates of certainties. Do Kwon volition proceed to bargain Bitcoin successful the billions; Michael Saylor volition continue to orangish pill large sanction investors, and determination volition lone ever beryllium 21 cardinal Bitcoin.

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