(Bloomberg) — Bitcoin may be behaving even more like a tech stock in recent months, but crypto diehards are promising things aren’t always going to be like this.
The world’s largest cryptocurrency fell as much as 6.1% Tuesday to trade below $38,000, the lowest since mid-March, a move that closely mirrored the decline in the U.S. stock market, where tech stocks lost almost 4%. But Bitcoin won’t always behave this way — soon, it will start to chart its own path, or so promises MicroStrategy Inc.’s Michael Saylor.
Traders right now think the coin is correlated to risk assets, so if they’re selling risk, they’re also selling Bitcoin. But, “it’s obviously not a tech stock — it is actually the ultimate risk-off asset,” Saylor said during a CNBC interview.
“In time, over the course of 4, 5, 6, 7 years, everybody figures it out. But right now, the traders and technocrats control the market-trading of Bitcoin, and it’s a function of the tug-of-war between them and the mood in the market,” he said.
That Bitcoin hasn’t been able to map its own course in recent months is somewhat of an awkward fact in the crypto space — the coin had for years been offered as an uncorrelated asset, one that’s not beholden to any governments and unlikely to be swayed by outside forces or factors.
But both tech stocks and Bitcoin have notched big swings this year as the Federal Reserve becomes less accommodative as part of its fight to combat inflation. That means that the coin could largely be seen moving up or down in the same fashion as stocks on any given day. The 90-day correlation coefficient of the coin and the tech-heavy Nasdaq 100 now stands above 0.60, among the highest such readings on record. (A coefficient of 1 means the assets are moving in lockstep, while minus-1 would show they’re moving in opposite directions.)
“When risk appetites are strongest, that’s when you see a lot of activity in the crypto space, but right now, risk appetites are coming in,” Shawn Cruz, head trading strategist at TD Ameritrade, said by phone.
But crypto investors are feeling hopeful it might break this habit. Despite the bleak outlook for the U.S. economy later this year, there’s a case to be made that crypto could fare well, according to Tom Dunleavy at Messari.
Inflation could stabilize at higher levels, “disrupting the negative correlation for traditional safe-haven assets vis-a-vis equities,” he wrote in a post titled “The De-Coupling Thesis.” New alternatives need to be considered under such a scenario. He projects the idea of Bitcoin-as-a-better-version-of-gold, among other things, will be further solidified and the coin’s correlation with equity markets will decline.
“It would not be shocking to see the new 60/40 in the coming years be something like 60/30/10 for equities, bonds, and crypto,” he said.
In the meantime, Bitcoin investors are looking at loses of 18% this year, while the Nasdaq 100 has slumped 20%.
And they weren’t the only crypto investors likely seeking solace after Tuesday’s slide. Dogecoin fell 10%, a day after surging 20%. Ether declined 5.7% and Avalanche slumped 5%.
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