Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Cryptoverse: Buying the dip? Bitcoin's a rates rookie

Economy May 10, 2022 11:05PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
2/2 © Reuters. FILE PHOTO: A Bitcoin and Dollar note are seen in this illustration picture taken September 27, 2017. REUTERS/Dado Ruvic 2/2

By Lisa Pauline Mattackal and Medha Singh

(Reuters) - Bitcoin has scant experience with rising interest rates, posing perils for investors looking to capitalize on its dramatic drop.

The cryptocurrency has tanked along with other risk assets such as tech stocks after the Fed amped up rates last week, sending them on a trajectory that's expected to pass 3% early next year.

Bitcoin was an awkward child on the fringes of finance during the Fed's previous tightening cycle, from 2016 to 2019, and was barely correlated with stocks. The last time interest rates hit 3%, in 2008, it was but a gleam in the eye of Satoshi Nakamoto.

Crypto price moves are baffling at the best of time, let alone when the market's entering uncharted waters, upping the risk level for traders pondering buying the dip.

Bitcoin fell to $29,731 on Tuesday, its lowest level since July 2021, after dropping nearly 12% last week, its worst weekly loss since January.

"This isn't the first time that we've reached this level, and the risk-reward ratio for picking up bitcoin here has been very good in the past year or so, but we are seeing a different macro backdrop," said Matt Dibb COO of Stack Funds, a Singapore-based crypto platform.

"The concern is this time is different with respect to whether we will see continued weak sentiment in traditional financial markets, which is likely given the inflation outlook and the likelihood of increased rates in the next few months or years."

The Fed's rate rise of by 50 basis points last week was its largest in 22 years. Further 50 bps hikes are expected in both June and July, with the possibility of a fourth move in September according to CME group's FedWatch tool.

"The era of free money is over. There's a large adjustment of investor appetite happening right now," said Chris Kline, COO and co-founder of Bitcoin IRA in Los Angeles.

Ether, the world's second largest cryptocurrency fell to $2,360 on Monday, its lowest mark since February, and smaller coins, or "altcoins", have sold off more aggressively.

"The more speculative altcoins are going to struggle, as we've seen in past volatile times in the crypto space. Bitcoin is considered risky, but some altcoins are at an even higher risk and those will have even larger sell-offs," said Kline.

"The question mark is, will people see (crypto) as a diversification tool in bad economies? Or is it just something to have when times are good?"

WHAT HAPPENS IN A RECESSION?

It is not just crypto markets that are tumbling. Equity markets have also plunged as investors fear global central banks are willing to push economies into recession, if necessary, to rein in inflation.

"What's interesting is that bitcoin itself hasn't declined quite as much as the Nasdaq and some other asset classes, but the correlation has tightened between them. It's certainly a higher correlation than we've seen in the past," said Benjamin Dean, director of digital assets at WisdomTree in London.

The Nasdaq and S&P 500 posted their fifth straight week of declines last week and the Dow Jones its sixth. It was the longest losing streak for the S&P 500 since mid-2011 and for the Nasdaq since late 2012.

Crypto's correlation with stocks is one reason for its recent crypto sell-off.

"We are getting feedback from investors in some family offices that are liquidating crypto because they are liquidating other assets, and they need to make it up on their book for this quarter to show that they're not dying in everything and they've got some money on the side to get back into equities when they bottom out," said Dibb of Stack Funds.

Some also note that sell-offs happen periodically in markets.

"From my perspective, two-way price action and occasional washouts are healthy for markets, including crypto," said Brandon Neal, COO of Euler, a project that allows lending and borrowing of crypto assets.

He added a note of caution, though.

"We've never seen crypto in a recession, and it's anyone's guess what will happen."

Cryptoverse: Buying the dip? Bitcoin's a rates rookie
 

Related Articles

Celsius pays down 143M in DAI loans since July 1
Celsius pays down 143M in DAI loans since July 1 By Cointelegraph - Jul 04, 2022

Celsius (CEL) has repaid a substantial amount of its outstanding debt to Maker (MKR) protocol since the beginning of the month, signaling that the troubled crypto lending platform...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (5)
Justin Lowery
Justin Lowery May 11, 2022 12:00AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Dip? More like waterfall
ZS Beck
ZS Beck May 10, 2022 11:30PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
You can use a roll of toilet paper instead a gold coin as a logo .
Alan Rice
Alan Rice May 10, 2022 7:35PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
ALWAYS "invest" at your own risk.
Alan Rice
Alan Rice May 10, 2022 7:34PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Should be BC support at $15,000.
Md Omar faruk
Md Omar faruk May 10, 2022 4:06PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
naic
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email