Watch Stocks.
As BTC broke the $40,000 level, I think many of you are wondering what to expect. I’d say that the best place to look for cues is the stock market.
The topic of increasing correlation between the S&P 500 and BTC is brought up more often over time. And for a good reason—take a look at the chart below.
BTC (gold) vs. SPX. Sources: Nasdaq, CoinGecko.
As you see, BTC moves pretty much in sync with stocks. This makes the task of anticipating its, and the whole market’s, next move more difficult. Stocks are not a leading indicator for crypto.
What influences stocks? Rate hikes. We discussed this before when we were speaking about forward-looking markets. Until a rate hike occurs, the market is nervous trying to price in potential consequences of higher rates. However, there’s less uncertainty once the event happens, so the market grows.
Moreover, the hike turned out to be lower than expected. The expectation was 0.5%, but it turned out to be 0.25% because of the geopolitical tensions. Although further hikes are due, the market has a breather after a long period of stressing over rates.
Tech stocks are no longer overheated. They have a lot of room to grow after a dramatic sell-off. And crypto is similar to them in nature.
ARK ETF, which includes some of the prominent tech stocks. Coinbase is also there. Source: Wall Street Journal.
Given the above, there are reasons to be bullish on equities and crypto. However, geopolitical tensions may still turn everything upside down. And this is the most unpredictable factor.
Add fears of rising inflation and rapidly growing oil and gas prices on top, and you get a valid reason to be bearish on the markets. The point is, it’s too noisy right now, and, as much as I want BTC to go to $100,000 and beyond, I don’t see any clear signs of a resumption of the bull market.
BTC is a risk-on asset, which means that it won’t likely perform well if people rush to safety. For now, they don’t seem to do so, but I’m also not sure if some event tomorrow will not cause them to.
That being said, the point of survival on the market is in having exposure regardless of whether the prices are up or down at a given movement. On a long timeframe, there’s a lot more confidence about asset growth.
SIMETRI Portfolio – A Slight Bump
Our portfolio slightly bounces as the market reacts bullish to a relatively small rate hike. While most of the recent picks are still underwater, there’s a project that goes against the grain, Aave, for the reasons we outlined as a catalyst. Feels good.
That being said, the market doesn’t look strong enough yet. Thus, we may see another hit to the portfolio’s performance over the coming weeks.
