Bitcoin Is Increasingly Acting Like Just Another Tech Stock

SAN FRANCISCO – Bitcoin was conceived more than a decade ago as “digital gold”, a long-term store of value that will withstand broader economic trends and provide protection against inflation.

But the crashing price of Bitcoin in the last month shows that the vision is far from reality. Instead, traders increasingly view cryptocurrencies as other speculative tech investments.

According to an analysis by data firm Arken Research, since the beginning of this year, the price movement of Bitcoin has been closely reflected in the Nasdaq, a heavily weighted benchmark towards technology stocks. That means Bitcoin’s price fell more than 25 percent in the past month to less than $ 30,000 on Wednesday – less than half of November’s peak – as it plunged into a massive collapse of tech stocks as investors struggled with higher interest rates. And the war in Ukraine.

The growing correlation helps explain why those who bought cryptocurrency last year, hoping it would become more valuable, have seen their investment pitfall. And while Bitcoin has always been volatile, its growing resemblance to risky tech stocks clearly shows that its promise as a convertible asset remains unfulfilled.

“It invalidates the argument that Bitcoin is like gold,” said Vettel Lunde, an analyst at Arken. “Evidence points in favor of Bitcoin is just a risky asset.”

To capture the pricing correlation between Bitcoin and Nasdaq, Arken Research has assigned a statistical score between 1 and -1. A score of 1 indicates a certain correlation, which means that the values ​​move forward in the search, and a score of -1 shows a definite difference.

Since January 1, the 30-day average of the Bitcoin-Nasdaq score has moved closer to 1, reaching 0.82 this week, the closest ever to an accurate, one-to-one correlation. At the same time, the price movement of Bitcoin has been distinguished from the fluctuations in the price of gold, which have been largely compared to assets.

Integration with Nasdaq has grown during the coronavirus epidemic, which is driven in part by institutional investors such as hedge funds, endowments and family offices that have poured money into the cryptocurrency market.

Unlike the idealists who drove the initial enthusiasm for Bitcoin in the 2010s, these professional traders view cryptocurrency as part of a larger portfolio of high-risk, high-reward tech investments. Some of them are under pressure to secure short-term returns for consumers and are less ideologically committed to the long-term potential of Bitcoin. And when they lose confidence more widely in the tech industry, it affects their bitcoin trading.

“Five years ago, the people who were in crypto were crypto people,” said Mike Burrows, founder of blockchain investment fund Fortis Digital. “Now you have guys who are in a whole period of risky wealth. So when they get hit there, it affects their psychology.

Concerns in stock markets affected by challenging economic trends, including Russia’s invasion of Ukraine and historic levels of inflation – have manifested themselves in the decline of tech stocks in particular this year. Meta, a company formerly known as Facebook, is down more than 40 percent this year. Netflix has lost 70 percent of its value.

Shares of Coinbase fell 26 percent on Wednesday after reports of declining cryptocurrency exchanges, first-quarter earnings and a loss of $ 430 million. The company’s stock has fallen more than 75 percent overall this year.

The Nasdaq is already in bear-market territory, ending 29 percent below its mid-November record on Wednesday. November was also when the price of Bitcoin peaked at around $ 70,000. This crash is a reality check for bitcoin promoters.

Ed Moya, a cryptocurrency analyst at trading company OANDA, said: “Late last year, Bitcoin was a safe haven to curb inflation, an indisputable loose belief.” Gave. “

The prices of other cryptocurrencies have also been crushed. Ether, the second-most valuable cryptocurrency, has fallen nearly 25 percent to less than $ 2,300 since the beginning of April. Others, such as Solana and Cardano, have also experienced endless drops this year.

Bitcoin has rebounded from previously large losses and its long-term growth remains impressive. Before the epidemic boom in crypto prices, its value hovered well below $ 10,000. True believers, who call themselves Bitcoin maximists, are adamant that cryptocurrency will eventually break with its relationship with risky assets.

Michael Sailor, chief executive of the business-intelligence company Microstrategy, has spent billions of his generation’s money on Bitcoin, amassing a fortune of over 125,000 coins. Shares of the company have fallen nearly 75 percent since November as the price of Bitcoin plummeted.

In an email, Mr. Silor blames the tragedy on “merchants and technocrats” who do not appreciate the long-term potential of Bitcoin to transform the global financial system.

“In the near future, people who have little appreciation for the virtues of Bitcoin will dominate the market,” he said. “In the long run, maximists will prove to be right, because billions of people need this solution, and awareness is spreading among millions every month.”

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