This post was first published on The Humble Dollar
No doubt, Cryptocurrencies had a wild year 2021. From the quick start in January to the Rise in April and then the gimmicks in October, folks who seemingly own every digital currency have likely made big profits if they have owned them since early 2021.
What if people get in later in the year? Despite being all over the financial press and having signed all sorts of sponsorship deals – including the naming rights to the former Staples Center in Los Angeles – the total capitalization of the crypto market is pretty much unchanged today from the highs hit in May and September, and opposite that All time high slightly decreased from November 11th. Nevertheless, the entire cryptoMarket capitalization has risen by 211% since the beginning of the year.
Some investors are keeping a close eye on the two loyal followers in crypto land: Bitcoin and Ethereum. These coins rose sharply before the market closed on Thursday. Santa Claus came early for so-called HODLers who hold onto their cryptocurrencies for their lives. Tech stocks also rose on the last day of trading before Christmas.
CNBC’s Brian Kelly noted that Bitcoin’s 30-day correlation with the index 47% – the highest since September. Kelly claims Bitcoin could be more correlated to the stock market in the years to come as institutions accept it as a traditional asset.
If this thesis works, ownership of cryptocurrencies could lose its shine in the future. Because if virtual currencies simply move with stock prices, the diversification advantage disappears.
The next year is going to be another fascinating year for cryptos, especially given that massive gains have been made but recent performance has been lukewarm. Next year will also be a period of credit tightening if the Federal Reserve gets its way. In addition, there will almost certainly be fewer fiscal incentives. That was tailwind at the beginning of the year, but will be headwind in 2022.
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Source: Crypto News Deutsch