We live for this moment, says Crypto Exec about the hard market contraction

We live for this moment, says Crypto Exec about the hard market contraction

After the latest protocol of the US Federal Reserve on Wednesday, both cryptocurrencies and stocks during the trading hours on Thursday experienced a slight upswing, but the bear market is far from over, say analysts.

James Butterfill, research manager at the investment company Coinshares geared to digital assets, recently wrote in a study Note that Bitcoin is "increasingly regarded as a interest-sensitive asset", with the "aggressive steps" of the Fed in relation to interest rate increases Could have triggered the decline in cryptocurrency. According to Butterfill, a correction was "necessary", "to rinse irrational exuberance", which remained from the long -lasting bull market.

Butterfill added: “We do not believe that This market crisis has already ended, the combination of a continued restrictive fed and probable failures in the stock market and mining sector could push the prices down at short notice.”

The supervisory officers agreed last month that interest rates may have to rise faster in order to combat modern record inflation, which will probably lead to an increase of 75 basis points or higher in July, some analysts speculate. Futures markets that respond to interest rates on interest rate increases have largely priced in the likelihood of increasing no more than 75 basis points.

"Interest rates affect all financial assets, it is no different with cryptocurrencies," told Daniel Keller, co -founder of the decentralized blockchain flux. "However, most in the crypto range are somewhat deaf compared to the ups and downs of the conventional market; we have seen great changes that were" priced "in blockchain-based assets that are traded around the clock."

Bitcoin and other cryptos, which were once regarded as inflation protection because of their relatively uncorrelated trade patterns, are no longer the safe harbor, which some once believed, added Keller.

In May, the correlation between Bitcoin and the technology -heavy Nasdaq broke through 0.8 for the first time - Bitcoin's tandem trade with the S&P 500 also reached similar levels in early May. In June, the correlation between Bitcoin and the S&P 500 fell to about 0.5 Coin metrics Data . A coefficient of one means that the corresponding assets are fully aligned, while a negative value of one signals the opposite.

"The reactionary retreat to interest increases will continue to affect the emerging and disruptive technology sector until the adoption curve has reached a critical mass," said Keller. "I would also like to point out that this is the opportunity to open up new markets in a clear correction cycle. In the blockchain area we live for these moments."

In addition, Chris Kline, Chief Operating Officer at Bitcoin Ira, pointed out that rising interest rates and inflation influence the labor market.

"A big deal that people should probably keep an eye on are layoffs and when they come," said Kline. "This is my big question because it has to happen. And it's not just about crypto, tech shares are also beaten this year."

If cryptos continue to correlate with technology stocks, the way to relax will be long, according to Nicholas Colas, co -founder of Datatrek Research.

So that the Nasdaq regain its November highest stands, the index has had to increase by 41 % since Wednesday. For the S&P Large CAP technology sector, which reached its highs in December, an increase of 36 % would be required to return to a record market capitalization.

"When will the US technology shares return to their highs from November/December 2021?" Said Colas. "Just as long as the S&P 500 needs to come back to its highest levels because technology ... constantly constitutes such a large part of the S&P 500 (27 % and 24 %) that it is difficult to recognize a strong divergence between the two."

Nevertheless, this also means that technology should achieve outperformance during the next bull market, added Colas.

"The end result here is simple: Whenever you believe that shares have reached the valley sole, you should consider technology as a long -term overweight," said Colas. "Growth is a scarce commodity, even in a recovery of the economic/market cycle, and the technology is best positioned to deliver it."

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The contribution "We live for this moment", Crypto Exec Says of Harsh Market Contraction is not a financial advice.