Trading as a risk asset
Over the years, Bitcoin and other major crypto currencies such as Ethereum and Ripple have repeatedly embarrassed their critics, becoming the dominant asset between consumer payment options and institutional investors. This remarkable growth came as cryptocurrency was under scrutiny by regulators as they used more fraud and money laundering than regulators.
Bitcoin has risen more than 500% since the beginning of 2020, and after two major corrections, both took place in 2021. The latter took shape as Nassak, a technology hub, approached. The price is rising $ 36,725 from a six-month low on January 24. As Bitcoin began to grow in mid-2010, positive relationships with stocks began to emerge in 2016. This relationship was strengthened in 2020 and the close relationship with the S&P 500 has been remarkable since the outbreak.
However, the Bitcoin rebound is a bit stronger than Wall Street’s frightening rebound, and that relationship is a bit weakened again. Meanwhile, gold is on the rise this year as geopolitical concerns escalate. Tensions between Russia and Ukraine have soared this week to more than $ 1,890 / oz.
Bitcoin is often compared to safe gold, which some crypto fans call “digital gold.” However, there are some convincing arguments that cryptocurrencies have safe features, even though bitcoin is often associated with gold, and sometimes it supports bullish reversal.
There is no doubt about Bitcoin as a stock market. Like precious metals, the supply of Bitika is constant, and it can be stored the next day and returned at no cost. It acts as a trading center and has no fundamentals in the way other assets, such as stocks, determine its value.
This feature is why some investors have used Bitcoin as a bulwark against inflation over the past year. In contrast, it could be argued that inflation to the bourgeoisie is relatively limited compared to previous inflation.
Still, the question remains as to whether Bitcoin is a good bargain like traditional hard gold. Recent geopolitical developments in Ukraine suggest another. Although the broad lines in both Gold and Cryptos coincide, the exact timing of the major price movements is irrelevant.
In fact, Bitcoin’s biggest gain this month was on the back of a booming market demand following some good corporate earnings that led to the January fall of Wall Street. The only difference here is that the recovery in cryptos seems to be on a much stronger basis.
Crypto-based headlines may be related to this. For example, after El Salvador El Salvador rejected the IMF’s recommendation that Bitcoin be devalued, the Russian government appears to have chosen to control digital currencies instead of directly blocking digital currencies. .
Meanwhile, the first digital currency has recently taken the lead in the market, and Bitcoin itself is taking advantage of the changes in the crypto world. Moreover, despite the recent ban in China, the growth in revenue for crypto mining companies has further contributed to the positive sentiment for Bitcoin.
Another factor to consider here is that short-term compression due to recent inflation may exacerbate short-term gains.
Can the march last?
In summary, the evidence that bitcoin is a proxy is much stronger than the evidence supporting a safe environment. By the way, it is hard to believe that the asset could be considered a safe haven in the recent past, compared to the S&P 500 Fear Index – VIX volatility index. In tweets from some high profile individuals like Elon Musk.
With the Federal Reserve interest rate expected to increase in the coming months and tightening financial conditions, it will be interesting to see what Bitcoin will do with gold or stocks. In any case, the recent stumbling block is likely to hit you soon.
However, in the long run, when a growing number of investment managers see the benefits of adding bitcoin and other cryptocurrencies to their portfolios, they will not be able to avoid further large-scale protests. This could inadvertently support Cryptos as a real asset class, and even pushing for more control over cryptocurrencies could benefit the industry.