It seems that some of the high-ranking managers of crypto funds have less of a crystal ball than some would like to believe.
Back in February, Joey Krug and Dan Morehead, two co-directors of cryptocurrency hedge fund investments Pantera Capital , predicted that cryptocurrency markets will separate from traditional markets in the coming weeks.
We believe that over the next few weeks, it will be disconnected and the cryptocurrency will again be traded independently. “My personal opinion is that $2200 in ETH was probably the bottom,” Joey Krug said at the time.
At the same time, Dan Morehead also had an optimistic view of digital assets, even in the face of looming interest rate hikes.
I think when all is said and done, investors will be given a choice: they have to invest in something, and if the stakes go up, blockchain will be the most relatively attractive,” Morehead said.
Now, in mid-May, it seems that this time pantera executives were wrong.
As of May 17, Bitcoin (BTC), the largest crypto asset, is down more than 50% from last November’s all-time high. Meanwhile, the correlation between BTC and the stock market reached its highest level on Monday last week, when BTC fell by 10%, and the Nasdaq Composite Index, a stock index consisting of many major technology companies, fell by 4%.
Commenting on the current state of the crypto market, Noel Acheson, Head of Market Analysis at a Digital Asset Broker Genesis Global Trading Told Site that institutional investors focused on macroeconomics have changed the way crypto markets move over time.
According to Acheson, while the correlation between BTC and stocks has been cyclical in the past, changing from positive to negative and back again, it began to change in early 2020 with the increased institutionalization of the crypto market.
Correlations have now reached a uniquely high level, overcoming 0.75 on a 60-day basis during the turbulence of recent weeks, she said.
A correlation of 1 means that the two markets move synchronously with each other, and 0 means that they are not correlated at all.
According to Acheson, this makes sense, if macro investors treat bitcoin as a risky asset, it will behave like a risky asset, especially since short-term investors tend to control pricing.
Despite this, she added that there is still hope for those who want bitcoin and cryptocurrency more broadly to become uncorrelated with traditional assets again. According to her, when short-term investors leave the market to reduce risks, long-term investors, who do not necessarily consider bitcoin as a risky asset, will again gain more control over pricing.
When this happens, the correlations will be corrected. Given the changing composition of market participants, it is unlikely that they will return to their levels of early 2021. It is also unlikely that they will remain at a low level, as macro investors will return to the market as soon as they see that the cryptocurrency will again begin to outpace the market, according to an analyst at Genesis.
In any case, the idea of separation is still alive.
#Cryptocurrencies #stocks #disconnect #forecasts #hope