May 22, 2022

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Double the Nasdaq is dropping from the highs

Double the Nasdaq is dropping from the highs

The Bitcoin Just over 53% of Historic heights It was reached last November, roughly coinciding with the highest point in Nasdaq 100Wall Street index in which technology companies The most important in the United States. The context of interest rate hikes by central banks is also punished, the decline in the index since then is 24%.

Monday was the fifth consecutive session for the world’s most popular cryptocurrency, which lost 18.6% of its value in the past week. Since the beginning of the year, the drop is 32%, from the roughly $48,000 it started the year with to the $31,000 it’s currently listed.

Bitcoin touched its all-time high on November 10, 2021 at $68,991, and since then, six months ago, it has lost just over half of its value in the context of monetary tightening in various countries. central banks To combat high inflation.

Aside from bitcoin, one of the assets most affected by rising interest rates has been big tech stocks, since then Reviews They are mainly based on the benefits that they will receive in the future and will be reduced as interest rates rise. Taking the Nasdaq 100 as a reference, big US tech companies are down 4.47% in a jerky week for markets after interest rate hikes by the Federal Reserve and the Bank of England, nearly 25% since the start of 2022 and nearly 26% since then on October 22 The second (November) hit an all-time high of the day when it reached 16,764.85 points.

Bitcoin, Nasdaq, and the Federal Reserve

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With the first rate hike by the Federal Reserve this year, That occurred on March 16, Bitcoin is down slightly, compared to the above 2% rise recorded by the technology index on the same day. However, when the minutes of the same meeting were released on April 6 – which indicated a possible 50 basis point rate hike – the digital currency fell by 4.32%, higher than the 2.17% decline of the Nasdaq. When last wednesday finally been confirmed, The cryptocurrency is down 13%. It closed that day at $39,800, while the index added 3.41%, although the next day it lost more than 5%.

Sharp declines come amid debate over whether Bitcoin and other cryptocurrencies are a good option. store of value Before economic inflation Or as assets that investors use to compensate for a fall, for example, in stock. In this sense, the Bank of Spain underlines the increase in correlation – that is, the simultaneous behavior of two financial assets – that it has been experiencing since 2020 Cryptocurrencies and stock markets.

“There is ample evidence in the economic literature about how shocks that lower agents’ income and wealth can increase agents’ wealth risk aversionWhich would lead them to dispose of other financial assets whose values ​​will also be corrected,” the banking supervisor warned in his Financial Stability Report. According to data collected by BloombergIn the last 40 days, bitcoin’s correlation with the S&P 500, where the weight of tech companies approaches 38%, has reached a historical maximum of 0.82 – between -1 and 1, the closer to this last higher number is the correlation -.

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“This is an indication of an important change in the presence of institutions within Crypto Asset Marketwhich now represents a much larger percentage of ownership and tends to combine the decision-making process related to cryptocurrencies and other major assets,” says Simon Peters, Senior Crypto Analyst at eToro.

Now, the “concern for crypto-asset investors… When will autumn end? In an adverse environment where markets are struggling to locate comfortable levels as a result of rising interest rates”, stresses the same expert, who considers that the key to cryptocurrency holders is to “ensure they are satisfied with the investments” and “willing to continue the path in the face of a problem.” higher volatility».