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Bitcoin could outperform stocks despite rate hike, report suggests

continues to shed other risky assets with increasing bullishness.

A key takeaway from Bloomberg Intelligence’s report on Bitcoin for May is its resilience in the face of headwinds from rate hikes. The Fed recently announced a inflation to throttle at its highest level in over four decades.

However, the report notes that Bitcoin is ideally positioned to outperform the broader stock market with its inflated prices.

Bitcoin Now a Risk-Free Asset, Bloomberg Report Suggests

Bloomberg Intelligence bases its proposal on Bitcoin’s increasing acceptance and maturation, making the digital currency behave like a risk-free asset.

It notes that Bitcoin’s increasing institutional exposure and decreasing volatility versus stocks indicate a clear divergence favoring the former, giving investors another option when trying to avoid pitfalls typically associated with traditional assets are connected.

The divergence becomes all the more critical as the FOMC becomes increasingly restrictive in its policies while maintaining its position. As the Federal Reserve continues quantitative tightening, Bitcoin could potentially cement its burgeoning status as a hedge against inflation.

Accordingly, to prove its thesis that Bitcoin has become a risk-free asset, Bloomberg Intelligence compared Bitcoin’s divergence to the stock index.

The comparison took into account the performance of both assets on a yearly basis (YTD) to May 3rd. Over the period, the NASDAQ 100 suffered a 20% drop in value, while Bitcoin fell just 15%.
Bitcoin could outperform stocks despite rate hike, report suggests, Crypto Trading NewsBitcoin vs stock chart
Source: Bloomberg Intelligence Report.

The chart above clearly shows that Bitcoin’s risk measures are approaching new lows relative to the stock market. The continued maturation of digital assets has caused 90-day volatility to reach levels last seen in 2020.

Bitcoin could outperform overextended stocks in the near future

Consequently, the report indicates that Bitcoin appears to be deviating from central bank policy decisions compared to previous bear markets. There is a strong correlation between the price of BTC and the Federal Reserve’s quantitative tightening and easing programs. This relationship has historically been a dominant driver of Bitcoin’s performance.
Bitcoin could outperform stocks despite rate hike, report suggests, Crypto Trading NewsFed Cycles and Bitcoin Performance
Source: Bloomberg Intelligence Report.

From the chart above, we can see that Bitcoin’s price surges during times of quantitative easing by the Fed. But when there is quantitative tightening, their value goes down.

However, this rise and fall level has become milder as the digital asset has matured.

As such, BTC is expected to drop in value as the Fed begins a new and potentially more aggressive round of tightening. The bullish stance seen by addresses that Bitcoin hold, however, will make the downturn milder than previously observed.

In general, Bloomberg Intelligence observed that the crypto market appears to be a nascent finance and money revolution. The lack of elastic supply, particularly for the top cryptos including bitcoin and , offers favorable price implications as adoption and demand increases.

Despite the raging global headwinds, these digital assets continue to shine and will be unstoppable in the 21st century. It stated:

“Our key takeaway from Bitcoin 2022 in Miami and Crypto Bahamas is that what is happening to bring money and finance into the 21st century is unstoppable.”

Following the Fed’s rate hike confirmation, BTC rallied after a steep decline that preceded the announcement. Bitcoin is up 3% as of the end of the week, according to Coinmarketcap. However, it is still trading below the $40,000 mark.

Historically, May has been a strong month for Bitcoin, and many investors would hope it sticks to its reckoning after a relatively bland 2022.

Source: Crypto News Deutsch

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