Cryptocurrency and stocks are in the same risk group, showing the same dynamics. In recent months, especially: the fall of tech stocks and digital assets started simultaneously, and then they reacted to the same positive-negative. On May 9, for example, crypto and securities were both down. Most tech stocks, so-called growth stocks, are trading 60-70% below their 2021 highs, so Bitcoin is still holding up well.
The stock market seems to have a “where do we go from here?” mood, but fatigue from a prolonged correction isn’t enough for a reversal. There is an important nuance worth mentioning: the only sector that stays afloat and grows steadily is the energy sector, including stocks of oil companies. Amid rising geopolitical uncertainty and high inflation, this segment is in high demand as a hedge. Besides, the energy sector is the only one able to offer a yield higher than 10-year Treasuries (a generic name of debt obligations of the US government — ed.), the rate on which has grown twice since March. So, it turns out that there is no particular motivation to take risks and get involved with technology companies, let alone cryptocurrency.
No one knows how long it will take to start recovery processes. Currently, it seems reasonable to expect a price rally for cryptocurrencies in the absence of global positivity. During previous strong corrections, Bitcoin lost about 85% of its peak value and only then reached the bottom. It took about 12 months to do so. Now, the market has been falling for six months and the main cryptocurrency has dropped by 60%. As we can see, the potential for further decline remains. Of course, the situation isn’t going to necessarily develop in the same way this time, but we do have some idea of the risks.
Investing in crypto is not only a high-risk process but is also usually a time-consuming one. Top assets have a chance to recover to at least their maximum values and bring good returns to those who didn’t buy them at their peaks. In other words, the gradual accumulation of coins in the current situation looks more attractive than it did a month or two ago.
