Notes

Wall St Week Ahead Crypto investors will be more uncertain after a rocky start to 2022


Investors are waiting for more gyrations in bitcoin and other cryptocurrencies, amid concerns that the direction of the Federal Reserve threaten to squelch market appetite for risk in all markets.



The volatility commonly in cryptocurrencies has been at full display in recent weeks. Bitcoin is the most popular cryptocurrency, is up roughly 33% from January. 24. It has been trading at $43,850. It has recovered from dropping that cut its cost by half from November's record peak. The major competitor, ether , is up about 45percent from Jan. 24, at about $3,200 after a nearly 56 percent drop from the record high of $4,868, during November.








The advocates of cryptocurrency have previously declared that they were not linked to other assets however, bitcoin as well as its rivals gained hugely over the period of two years. They soared alongside stocks as the Fed or other central bankers pumped extraordinary levels of stimulus into the global economy. Bitcoin has increased by 1,039 percent since March 2020, and Ethereum has surged by 2940%, however the increase in both of them has been slowed by frequent stomach churning selloffs.








The recent volatility in the market comes amid a wider market selloff driven by investors shifting their portfolios around to account for an ever-increasingly aggressive Fed that is forecast to raise rates as high as seven times during the year as it combats the escalating inflation. The most widely used S&P 500 index (.SPX) is down 5.5% year-to-date, while the technology-focused Nasdaq (.IXIC) also has dropped 9.3 percent..



Insecurity that a rapid current tightening in the central banking system moving forward will hamstring the risky assets have made it difficult for some traders to keep their optimistic view for bitcoin and other cryptos An asset class already classified as having high volatility.








An increase in tensions in Ukraine that are escalating in Ukraine, where Washington warned that a Russian invasion could commence any day, could also cause market volatility Investors have said. read more



Bitcoin does "really become the ultimate momentum trade and there are so many risk factors that could trigger a 40% drop completely out of the blue," said Ed Moya Oanda's senior analyst. Oanda.




The volatility of Bitcoin's currency hasn't stopped analysts from seeking to understand the value of the currency or to identify potentially significant price points.



Analysts at JPMorgan estimate bitcoin's current valuation at around $38,000 . This is roughly 15% lower than the current value based on its volatile nature in comparison to that for gold, another investment traders often use to protect their portfolios from risk of economic instability and inflation.



Vanda Research, meanwhile, said in a recent note that most of the bets that were speculative on a lower bitcoin price had been placed at about $47,000 "there may be a large short squeeze if that threshold is crossed, and retail investors return into crypto-trading."




Meanwhile, correlations between bitcoin and the S&P500 hit an all time high on Jan 31st, as per data that came from BofA Global Research, undercutting any argument that people might make to take advantage of the cryptocurrency as an asset to shield against market volatility.



Investors are expected next week to receive minutes from the most recent Fed meeting on monetary policy, which is due to be released on Wednesday. Walmart (WMT.N) along with chip maker Nvidia Corp (NVDA.O) will be among the companies to report resultsas the corporate earnings season gets underway.



Certain investors are bracing themselves to take advantage of the volatility in bitcoin, betting that the value in blockchain technology the built-in supply limit and the effect that it creates, will continue even in the face of frequent price fluctuations.



Jurrien Timmer director of macro-economics at Fidelity and Fidelity, compared the current crypto market's volatility to the volatile tech stocks that were experiencing during the dot-com bubble more than two decades ago, a boom-and-bust time that saw just a handful of companies left standing.



"Amazon is still around , and Apple is also around, and the two are bigger than ever. they're hoping that for bitcoin it will be exact," The man said. "But bitcoin isn' make money quick online from these waves of speculation or sentiment."



Bitcoin could reach the $100,000 mark by 2023. Timmer claims, based on his supply/demand models.



Others think that mature cryptocurrency such as Bitcoin and Ether are unlikely to produce the eye-watering gains they have notched since their beginning.



Instead, they are looking to the vast world of alternative currencies that are being created to benefit of the money flooding into the crypto sector such as the metaverse and NFTs. The latter saw the equivalent of $30 billion in venture capital investment last year, according PitchBook.



A few altcoins are cosmos Terra Luna, and Polkadot that are down 20.5% (38%), 20.5%, and 25.5 percent year-to-date, respectively in accordance with coinmarketcap.com.



Understanding the risks related to the decentralized financial system and its risks is likely to be among the main challenges for investors in 2022, according to Lily Francus, director of quantitative research strategy at Moody's Analytics.



Cryptocurrencies "are likely to remain extremely volatile in the coming years, but there are some significant players on both the institutional side and the retail side who are growing, meaning that interest is still growing," said Oanda's Moya.




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