Last month, Bitcoin held the $60,000 level and looked ready to take $70,000. In hindsight, last week’s plunge mirrored the drop in the S&P 500 index. Are cryptocurrency and stock markets now more highly correlated than ever?
When stock markets fall, speculators who leverage will need to raise cash to meet margin requirements. They need to sell winning assets like bitcoin. The Federal Reserve’s admission that inflation is not transitory and that rates must rise sooner (by the second half of 2022) is hurting Bitcoin prices.
Bitcoin prices may fall further or rally. Investors have no way to predict its direction. Still, watch the fintech and crypto platform markets, too. For example, Sofi (SOFI) topped $24 and closed at $15.19. PayPal (PYPL) is only 2.7% above its 52-week lows. In the crypto mining segment, Riot Blockchain (RIOT) and Marathon Digital (MRNA) erased last month’s rally. And Coinbase (COIN) is off 12% in the last week. Those are bearish patterns signaling some weakness for Bitcoin and cryptocurrencies in the near term.
Expect the long-term price for Bitcoin to rise. Investors who do not want to hold a depreciating U.S. currency or inflated stocks will still accumulate the cryptocurrency as a diversification strategy.
