According to Bloomberg news, it is pretty likely that the largest digital currency might be behaving more like a tech stock of late. But the crypto diehards are promising that this is not how things will always move.
Bitcoin’s Biggest Plunge Since Mid-March
The largest cryptocurrency dropped by as much as 6.1% Tuesday to trade lower than $38,000, the lowest since mid-March. This is a move that mirrored the drop in the US stock market, where tech stocks dropped by approximately 4%. However, Bitcoin will not always behave in this manner, and sooner it will start chalking out its path, as stated by Michael Saylor of MicroStrategy Inc.
The traders think that this digital currency might be related to risk assets. As such, if they are selling risks, they are also parting with their Bitcoin. However, Saylor revealed during a CNBC interview that Bitcoin is not a tech stock, but it is ultimately a risk-off asset.
In the crypto space, it is somewhat odd that Bitcoin, which is the largest digital currency, has not been able to carve out a course for itself in recent months. The coin had been offered for years as an uncorrelated asset, one that is quite not likely to get disturbed by outside sources and one that has not been accountable by any government.
However, Bitcoin and tech stocks have both undergone considerable swings in the current year as the Federal Reserve is not accommodative enough this year as it is trying to combat inflation. Bloomberg News also states that this could only mean that it is pretty likely that the Bitcoin will be moving similarly as tech stocks on any given day. The 90-day correlation coefficient of Bitcoin and that of tech giant NASDAQ 100 is now above 0.60, which is the highest reading on record. If the coefficient is 1, it indicates that the movement of assets is in lockstep, whereas minus-1 implies that it is moving in the reverse direction.
But crypto investors have their hopes set high that this habit might break. Despite the economy in the US seeming to be bleak in the current year, there are chances that crypto could perform well, said Tom Dunleavy from Messari.
Meanwhile, the investors of this largest cryptocurrency are looking at the losses of 18% in the current year, while NASDAQ 100 has dropped by 20%.
However, it is not that they were the only investors in Bitcoin that have found some solace following Tuesday’s slide; Dogecoin was found declining by 10%, a day after it surged by 20%. Avalanche plunged 5% while Ether dropped by 5.7%.
