Bitcoin’s recent market drop is alarming for investors. Before, it was seen as a safe haven and was immune from fluctuations in risk assets such as high-yield bonds, stocks and commodities. However, the market has shifted in recent months, with the S&P 500 down over 17 percent since its start in June 2022. The drop is a result of market volatility in risk assets such as stocks, inflation and the Fed’s monetary policy, all of which affect the value of these risky assets.
Investors are pulling out of risky assets, and the crypto market is no exception. A recent hike by the Federal Reserve is likely to be only the first of many jumps in the near future. Some investors are worried that a “soft landing” – a shift to slower growth – isn’t possible. Likewise, geopolitical risks and uncertainty are also complicating the situation. Despite the market’s current slump, some investors are still holding cryptos, hoping to make significant returns. While high potential returns come with high risks, the current market environment is not conducive to such a move.
However, the recent drop in global equities suggests that bitcoin could see a downtrend if stocks fall below certain key levels. In June, Bitcoin hit $14,000 before dropping to $7,500 three months later, a 46% drop. The resulting fall has created a market that has been largely driven by retail investors. In that sense, bitcoin is becoming a more “safe haven” than equities.
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Moreover, the price of Bitcoin has become more accessible, and it’s more secure to buy through a secured exchange. As a result, investors expect the speculative craze to continue. They hope to sell for more than they paid. And in the long run, Bitcoin should continue to rise, which would mean a huge boom for the cryptocurrency market. It will be interesting to see whether this trend continues!
