Investors are poised for further changes in bitcoin and other cryptocurrencies, as a hawkish Federal Reserve worry threatens to dampen risk appetite in the markets. The volatility traditionally associated with cryptocurrencies has been on full display in recent weeks. Bitcoin, the largest cryptocurrency, is up nearly 33% since January 24 and recently traded at $43,850 (roughly Rs.33,17,000), marking a drop in its price from less than half of November’s record high. is rebounding. Its main rival, Ether, has risen nearly 45 per cent to around $3,200 (about Rs 2,42,100) since January 24, down nearly 56 per cent from its record high of $4,868 (about Rs 3,68,200) in November. ,
while supporters of cryptocurrency Once pointed out by their lack of correlation with other assets, bitcoin and its peers have seen huge gains over the past two years, with stocks rallying as the US Federal Reserve and other central banks introduced unprecedented levels of stimulus to the global economy. pumped up. Bitcoin 1,039 percent up from March 2020 and Ethereum 2,940 percent increase, although rallies in both cryptocurrencies have been hampered by numerous belly churning sell-offs.
His recent volatility comes amid a broad market sell-off driven by investors. re-calibration His portfolio is attributed to the more aggressive Fed, which is now expected to raise rates. seven times This year as it fights rising inflation. The benchmark S&P 500 index is down 5.5 percent year-on-year, while the tech-heavy Nasdaq is down 9.3 percent.
There are concerns that an ongoing aggressive central bank tightening cycle will hamper riskier assets, making it difficult for some traders to maintain their bullish outlook on bitcoin and other cryptocurrencies, an asset class that is already It is identified with intense instability.
Investors said rising tensions in Ukraine, where Washington warned a Russian offensive could begin any day, could trigger broad market moves.
“Bitcoin has really become the ultimate momentum trade and there are many risks that could trigger a drop of anywhere from 40 percent,” said Ed Moya, senior analyst at Oanda.
of bitcoin Volatility hasn’t deterred some analysts from trying to assess a currency’s fair value or pinpoint potentially important price levels.
Analysts at JPMorgan estimate bitcoin’s current fair value to be around $38,000 (roughly Rs.28,74,500) – about 15% lower than its recent price – based on its volatility compared to gold, another asset investors often trade with inflation. Use it to hedge your portfolio against and economic uncertainty.
Meanwhile, Wanda Research said in a recent note that most bearish bets on a weak bitcoin price were recorded at around $47,000 (approximately Rs 35,55,200), and “a large short-squeeze if the above range holds.” May be crossed, and retail investors return to crypto-trading.”
Meanwhile, the correlation between bitcoin and the S&P 500 hit an all-time high on January 31, according to data from BofA Global Research, which is the case for those hoping to use the cryptocurrency as a hedge against market turbulence. reduce the.
Investors are anticipating minutes from the Fed’s most recent monetary policy meeting next week on Wednesday. Walmart and chipmaker Nvidia Corp will be among the companies reporting results as corporate earnings season gets underway.
Some investors are bracing themselves for an exit from volatility in bitcoin, betting that the long-term value proposition of blockchain technology, the underlying supply limits, and the network effects it generates, will remain the same despite persistent price fluctuations. .
Jurienne Timmer, director of global macros at Fidelity, compared the current speculation in cryptocurrencies to the turmoil tech stocks experienced more than two decades ago during the dot-com era, a boom-and-bust period in which companies compared The small group was left standing.
Timmer has said based on his supply and demand model that bitcoin can reach $100,000 (approximately Rs 75,64,300) by 2023.
Others believe that mature cryptocurrencies like bitcoin and ether are unlikely to deliver the kind of eye-watering gains they have made since their inception.
Instead, they are looking to the new universe, alternative coins It is being built to leverage money pouring into the crypto space, including Metaverse and NFTs, which saw a $30 billion (about Rs 2,26,800 crore) venture capital investment last year, according to Pitchbook.
According to Coinmarketcap.com, some altcoins include Cosmos, Terra Luna and Polkadot, which are down about 20.5 percent, 38 percent and 25.5 percent, respectively, year-on-year.
understanding the risks are linked Lily Frankus, director of quantitative research strategy at Moody’s Analytics, said that for her and decentralized finance is going to be one of the main challenges for investors in 2022.
“Cryptocurrencies” are going to be very volatile going forward, said Oanda’s Moya, but there are significant players on both the institutional side and the retail side that are still growing, so interest is still rising.
© Thomson Reuters 2021
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