01-23-2022, 01:00 PM
Why Are People Seemingly Ignoring the Macroeconomic Factors Affecting Crypto Prices?
<!-- SC_OFF --><div class="md"><p>There have been countless headlines from the last week or so declaring that Crypto is dead, the bubble is popping, etc.</p> <p>As someone who has a mathematics and finance background, in my view it's quite obvious what is happening here -</p> <p>1) In the past few years, crypto has become much more mainstream. Consequently, a lot of the big players in the space are also major investors in broader equity markets</p> <p>2) Consequently, movements in crypto have become more and more in line with the stock market</p> <p>3) We can think of crypto as a class as a <a href="https://www.investopedia.com/investing/beta-know-risk/#:%7E:text=Beta%20is%20a%20measure%20of,has%20a%20beta%20above%201.0.">high positive beta asset</a> - essentially, crypto is viewed as riskier than the market overall (I agree), which means it <em>tends to</em> swing in the same direction as the overall market but at bigger magnitudes. All else equal, if the stock market goes up 2%, Bitcoin might go up 10% (completely made up numbers).</p> <p>4) There have been a huge amount of macroeconomic policy changes in the past month that have spooked the equity markets. Consequently, the S&P500 has been on a downswing the entire month.</p> <p>5) Because crypto is a high-beta asset, it has followed suit. Since Jan 1st, the S&P 500 is down about 8%, Bitcoin is down ~27%</p> <p>Nothing has changed in the past month about the <em>fundamentals</em> of cryptocurrencies - if, for example, there had been a security flaw found in Bitcoin, or an extremely strict regulation introduction, then that <em>microeconomic</em> influence would explain a decoupling of performance between the S&P500 and Bitcoin.</p> <p>Does anyone else share this viewpoint?</p> <p><strong>TL;DR:</strong> Stocks go down, Bitcoin go down more.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Crypto_Actuary"> /u/Crypto_Actuary </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/sa4v0j/why_are_people_seemingly_ignoring_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/sa4v0j/why_are_people_seemingly_ignoring_the/">[comments]</a></span>Kind Regards R
<!-- SC_OFF --><div class="md"><p>There have been countless headlines from the last week or so declaring that Crypto is dead, the bubble is popping, etc.</p> <p>As someone who has a mathematics and finance background, in my view it's quite obvious what is happening here -</p> <p>1) In the past few years, crypto has become much more mainstream. Consequently, a lot of the big players in the space are also major investors in broader equity markets</p> <p>2) Consequently, movements in crypto have become more and more in line with the stock market</p> <p>3) We can think of crypto as a class as a <a href="https://www.investopedia.com/investing/beta-know-risk/#:%7E:text=Beta%20is%20a%20measure%20of,has%20a%20beta%20above%201.0.">high positive beta asset</a> - essentially, crypto is viewed as riskier than the market overall (I agree), which means it <em>tends to</em> swing in the same direction as the overall market but at bigger magnitudes. All else equal, if the stock market goes up 2%, Bitcoin might go up 10% (completely made up numbers).</p> <p>4) There have been a huge amount of macroeconomic policy changes in the past month that have spooked the equity markets. Consequently, the S&P500 has been on a downswing the entire month.</p> <p>5) Because crypto is a high-beta asset, it has followed suit. Since Jan 1st, the S&P 500 is down about 8%, Bitcoin is down ~27%</p> <p>Nothing has changed in the past month about the <em>fundamentals</em> of cryptocurrencies - if, for example, there had been a security flaw found in Bitcoin, or an extremely strict regulation introduction, then that <em>microeconomic</em> influence would explain a decoupling of performance between the S&P500 and Bitcoin.</p> <p>Does anyone else share this viewpoint?</p> <p><strong>TL;DR:</strong> Stocks go down, Bitcoin go down more.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/Crypto_Actuary"> /u/Crypto_Actuary </a> <br/> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/sa4v0j/why_are_people_seemingly_ignoring_the/">[link]</a></span> <span><a href="https://www.reddit.com/r/CryptoCurrency/comments/sa4v0j/why_are_people_seemingly_ignoring_the/">[comments]</a></span>Kind Regards R