The Current Scenario at the Cryptocurrency Marketplaces
May 2022 has become the focus of all conversations in the crypto arena. It is because of the negative happenings in the Bitcoin technology.
What’s Happening?
In 2020, experienced experts had expected an investor to benefit by an astounding 305.1% return on his/her investment. The next year also brought favorable rewards. Investors had been thrilled to receive returns that touched almost 60%. However, the BGCI (Bloomberg Galaxy Crypto Index) has a gloomy picture to present this year. It states that returns have dropped to a mere 33.9%.
A major reason is the Russia-Ukraine war, which has involved plenty of carnage and bloodshed. Naturally, investors find it difficult to be optimistic and confident. The greed and fear index reveals what investors feel about the current scenario. The index of the barometer is touching 12, indicating that crypto enthusiasts are terribly frightened about what would happen to their holdings and trade deals. Anyone can trade cryptocurrencies on Bitcoin smart.
The index is a good indicator of how present mindsets are working. It has a scale ranging from 0-100. Zero measures extreme fear, while 100 measures extreme greed. In other words, investors are beginning to feel that it is a good time to sell their holdings. It is a bear run. It is bound to wear off, eventually. Then, the market may pick up momentum again, permitting the purchase of suitable cryptocurrencies.
Another aspect of the problem is the greed of many investors. They go on a buying and selling spree, hoping to make good profits. The indication is there in the market index touching 100. This must stop, and investors must wait for a correction in the over-valued crypto market. In turn, the marketplaces will come back to average. The CEO and founder of The Investrology, Shivansh Bhasin advises investors to take charge of things wisely, since it is not possible to deal with uncertainties. People must be ready to confront challenges and work out strategies for converting them into gainful opportunities. Similarly, Warren Buffet has a word of advice for investors. He states that they should exhibit greed, when others displayed fearfulness. Whenever they expressed greed, it would be wise to display fearfulness. Thus, investors should purchase the dip.
An example is Wood from ARK Investment Management. When Coinbase, the cryptocurrency exchange was not doing well, and began losing many active users, she bought a portion of shares from the exchange’s shares. The shares totaled 5,46,579. It was a bold move, increasing her fund’s assets by 7%. The surprising thing was that the price of each share had reduced by as much as 48%. Wood paid $58 per share, even then.
It is why investors do not see this crypto crash as a weakness in any asset. They feel that it is merely a change in the nature of the flow of capital, as evinced by the words of the CEO and co-founder of CoinSwitch, Mr. Ashish Singhal.
The Connection between Stock Markets and Crypto Markets
The cryptocurrency marketplaces carnage has carried over to the global stock markets too. The indices are displaying dismal figures even in this arena. A company like Apple has been witnessing stockholders sell off their holdings as quickly as possible. This has never happened before. Even the NASDAQ Index has been affected. It revealed a yield-to-date of 27% to 32%. In April, it was 14.83%. As for May 2022, the S&P 500 Index is exhibiting a slump of nearly 4%. It does not help that the U.S. Federal Government has been pondering the increase of rates of interest. It contributed to the market dip too.
The link between stock markets and crypto markets have been noted over the years, via the NASDAQ Index. For instance, NASDAQ and BTC display 0,82 as the correlation coefficient. As for the connection between cryptocurrencies and the S&P 500 Index, the correlation coefficient is 0.59. On the coefficient correlation scale, 0 is a negative association, whereas 1 reveals perfect compatibility. Thus, the cryptocurrency marketplaces are akin to clones of the behaviors of stock markets. This correlation has given rise to a global panic about trading in virtual assets, and wondering how they would be affected by war, inflation, enhancement of interest rates, etc. Thus, turbulence prevails across the world’s financial markets.
