The market for cryptocurrency and traditional currencies was in turmoil on May 5, 2018. The worst day of trading since 2020 saw Bitcoin (BTC), drop over 7%, and the NASDAQ slip over 5%.
Many people hoped for a capitulation in crypto and trade markets. However, one analyst and some evidence suggest that Bitcoin is still a risk-off asset.
Markets are not mathematically-based or infallible. However, a risk-off asset is one that has a high performance asset (or that investors love) that is performing well when overall market sentiment drops.
Risk-off assets are government bonds; tech stocks and cryptocurrency are risk-on assets. When the market mood is positive and the United States Federal Reserve doesn’t raise interest rates, risk-on assets are more successful.
One Bloomberg analyst shared an interesting graph that described “adoption maturation and Bitcoin beating Equities”, suggesting that Bitcoin might finally be showing its true colors as a safe haven in turbulent waters.
This graph shows how volatility in Bitcoin and its performance outperforms that of the Nasdaq 100 stock market index.
Source: Bloomberg Intelligence
Mike McGlone, a key figure in the crypto market explained that it was a “nascent revolution” in fintech and money at the beginning of May.
“The fact that Bitcoin, the world’s most fluid and 24/7 trading vehicle, was down only 15% between 2022 and May 3, compared to 20% for the Nasdaq 100 Stock Index could indicate that crypto is transitioning to a more risk-off asset.”
Mike McGlone was interviewed by Cointelegraph about the report in January. McGlone stated that Bitcoin’s transition to a more risk-off asset would “propel it to $100K by 2022.”
He also stated that the “unstoppable” progress in money and finance is what is most important.
According to InvestAnswers Youtube’s chart, Bitcoin has risen 6% over the past 90-days compared to the Nasdaq’s 12% lowests.
Source: InvestAnswers Youtube
Bitcoin is slowly becoming a store value or “Gold 2.0” as the Winkelvoss twins call it. Popular Youtuber Benjamin Cowen warns that Bitcoin might not reach $100,000 this year due to the “risk-off” economic environment. He also says that inflation will be under control.
Related: Bitcoin celebrates half-way to the halving by setting a new hash rate record
It may be somewhat prescient to still call Bitcoin a “risky” asset, particularly considering that it is currently trading at the mid $30,000s.
There are some certainties, however. Do Kwon will buy Bitcoin in the billions, Michael Saylor will orange-pill big name investors and there will always be 21 million Bitcoin.
Eileen Wilson –Technology and Energy
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