Cryptocurrency can drive stocks down
After sharp declines in the cryptocurrency’s values in the second half of last month raised doubts about its use, experts are optimistic about the future recovery after some further falls due to the upcoming rate hike interest from the Federal Reserve, the war in Ukraine, and China’s crypto shutdown.
Major cryptocurrency Bitcoin saw its deepest decline since last June at $34,636.70 on February 24, and although it was subdued at $39,107 as of March 15, its volatility has conservative investors worried.
“Cryptocurrencies are falling because the tide is rising as the stock market is falling,” said Mike McGlone, senior commodities strategist at Bloomberg Intelligence. “We are in a period of reversal from the great excesses of cryptocurrency inflation in 2021.”
Bitcoin, nonetheless, he said, shows divergence strength.
Russia’s invasion of Ukrainian territories and the Federal Reserve’s fight against inflation could show a price reversal in 2022 similar to 2008, according to the March Bloomberg Commodity Outlook report. When crude oil prices rise, risky assets, such as cryptocurrencies, fall. As of March 15, the price of Brent crude oil had fallen to $98 a barrel, while gasoline prices hit record highs this week.
“I fully expect more weakness in less risky assets like the stock market, which means that would drive Bitcoin down, but I expect it to come out on top,” Mr. McGlone.
Cryptocurrency prices have fallen more than 33% to $1.9 trillion since hitting an all-time high of $3 trillion in November, Forbes reported.
Bitcoin rose 119% in January 2021 and Ethereum rose 10%. At the start of 2022, Bitcoin was up 218% and Ethereum 326%, according to Yahoo Finance. Dogecoin hit an all-time high of $0.68 last May and gradually fell to $0.11 on March 15.
The popular “meme coin” hype helped rally its price, but it has continued to stabilize below $0.35 since last August.
In Miami, Mayor Francis Suarez has championed the use of cryptocurrency as part of the integrated economy. His pro-business approach has helped attract financial and technology companies to the region. “Florida is a great place to do business,” Mr. McGlone said. “A lot of cryptocurrency [companies] are going there. In terms of crypto assets, they make up less than around 1% of global private equity portfolios, and that ratio just a few years ago was a fraction of 1%. I expect it to continue to rise.
Mayor Suarez, he said, leverages the advantage of welcoming uses of cryptocurrency. “It’s a good example of some of our leaders understanding the greater risks of falling behind,” he said, “embracing the rapid growth of technology versus the downsides of focusing on fossil fuels. – like crude oil – and it shows with Russia: a lot of that capital that has helped support Ukrainians is from crypto assets, cryptocurrencies, it’s the new world.