Bitcoin is up more than 10% this week, outperforming stocks

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A visual representation of Bitcoin.

Edward Smith | Getty Images

The currency rallied this week even as US stocks briefly pulled back from their new year rally and a major crypto lender filed for a long-awaited bankruptcy filing.

Bitcoin the last level higher by about 12% for the week, according to Coin Metrics, while ether increased by 14%.

In contrast, two of the three major stock averages were on track to post a losing week, which was shortened for the Martin Luther King holiday. The S&P 500 and Doe Jones Industrial Average were down 0.9% and 2.9%, respectively, for the week. The Nasdaq Composite, however, has been an outstanding performer. It is up slightly for the week and has gained 5% for the year, ahead of the other major indexes.

Bitcoin and ether rose 2.73% and 2.15%, respectively, in the same four-day period.

“Bitcoin appears to be trading in tandem with the Nasdaq and hedge funds again, after the past few months of disconnect,” said Sylvia Jablonski, CEO and chief investment officer at Defiance ETFs. this is news for crypto investors because if inflation is falling, and the Fed is closer to the end than the beginning of economic tightening, risk funds will get a breath of fresh air and maybe attract investors back in .”

Bitcoin traded in lockstep with stocks through most of 2022 as institutional investors entered the crypto market in the previous year and government stimulus and Federal Reserve monetary policy tightening led to be the biggest price drivers.

At the end of the year, however, that correlation weakened and the price of bitcoin remained relatively stable amid a wave of scandals and bankruptcies in the crypto industry and a general loss of confidence in the cryptocurrency. property.

Jablonski said bitcoin has benefited from bursts of performance this week as short-term sentiment favored Nasdaq stocks. Whether it holds up will depend on the Fed’s continued tightening path, and whether the economy is pushed into recession, she said.

This week’s rise in crypto prices also comes amid the latest blow to the industry: Genesis one of the largest lenders in crypto and one of the largest unsecured creditors of FTX filed for break late Thursday night.

Owen Lau, an analyst at Oppenheimer, said that this week’s crypto rally was an extension of the rally in risk assets that took place over the first two weeks of the year.

“Bitcoin stocks and digital assets were oversold last year,” he said. “These assets have been more than priced in the negative news since the collapse of FTX, the bankruptcy of BlockFi and the exit of Genesis.”

Investors and others are still wondering what the second and third order effects of the recent shocks might be.

However, Jablonski of Defiance warned that if there are more crypto-like shocks, digital assets could not simply break away from trading as risk assets, but start trading as “junk assets that cause panic” to investors.

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