Notes

Wall St Week Ahead Crypto investors face more uncertainty after rough start to 2022


Investors are waiting for more exuberance in bitcoin and cryptocurrency, as fears of the hawkishness of the Federal Reserve threaten to squelch market risk appetite.



The typical volatility associated with cryptocurrency was on full display during the last few weeks. Bitcoin , the largest cryptocurrency, has risen by roughly 33% from January. 24, and lastly traded at $43,850, rebounding from drop that cut prices in half compared to November's record-setting high. Its main rival, ether , has risen by around 45% since Jan. 24 with a price of around $3200 after a 56 percent decline from its record high of $4,868, at the time of the November.








While proponents of cryptocurrencies once declared that they were not linked to other assets bitcoin and other cryptocurrencies had huge gains over the recent two years, gaining in tandem with stocks as Fed along with other central banks have pumped extraordinary levels of stimulus into the global economy. royal q robot plan has increased by 1,039% since March 2020 and the price of ether has increased by 2,940%. The increases in both cryptocurrencies have been marred by numerous stomach churning sales.








The recent volatility in the market has occurred in the midst of a wider market decline triggered by investors changing their portfolios to account for a more aggressive Fed which is anticipating to raise rates by as many as seven times this year while it fights surging inflation. The benchmark S&P 500 index (.SPX) is down 5.5% year-to-date, while the tech-heavy Nasdaq (.IXIC) had lost 9.3 percent..



Fears that a ferocious government tightening of the pace going into the future will harm more risky assets have made difficult for traders to maintain their optimistic outlook regarding bitcoin and various cryptos An asset class already known for its extreme volatility.








Intensifying tensions in Ukraine which is where Washington warned that a Russian invasion could occur at any time, may result in market swings analysts said. find out more



Bitcoin does "really become the ultimate market for momentum trading and there are numerous risks that could create a 40% drop out of nowhere," said Ed Moya of Oanda, a senior analyst. Oanda.



There are a few experts from trying to establish the currency's fair value or point out potentially important price levels.



Analysts at JPMorgan believe that bitcoin's fair value as 38,000 dollars, about 15% below its recent cost based on the volatility in comparison with that of gold. Gold is a second asset commonly used by investors to hedge their portfolios against fluctuations in the economy and inflation.



Vanda Research, meanwhile, published a note that the majority of bearish bets placed on a weaker bitcoin price were placed around $47,000, and "there could be a major short-squeeze if this threshold is met and retail investors are reintroduced to trading crypto."



Additionally, the correlations between bitcoin and the S&P 500 climbed to an all-time record on January 31, as per research at BofA Global Research, undercutting the claims of those who plan to take advantage of the cryptocurrency as an asset to shield against market volatility.




Investors can look forward to minutes of the Fed's latest meeting on monetary policy due out Wednesday. Walmart (WMT.N) as well as chip maker Nvidia Corp (NVDA.O) will be among those reporting results, as corporate earnings season kicks off.



A few investors are getting ready to take advantage of the volatility in bitcoin, hoping that the potential long-term investment that blockchain technologies offer, its built in supply limit, as well as the network effect it produces, will endure regardless of the numerous price swings.



Jurrien Timmer director of macro-economics at Fidelity has compared the current cryptocurrency speculation to turbulent tech stocks of the dot-com era more than two decades ago. This was a boom and bust era that saw only the smallest number of companies surviving.



"Amazon continues to exist and Apple is still around , and they're both bigger than ever. the expectation is that for bitcoin it'll be exactly identical," the analyst said. "But bitcoin isn't immune to these waves of speculation or sentiment."



Bitcoin could hit 100,000 by 2023, Timmer says, according to his supply/demand model.



Others believe mature cryptocurrencies like bitcoin and ether aren't likely in delivering the eye-watering gains they have notched since their founding.



Instead, they're turning to the universe of new alternative currencies that are creating to profit from the capital pouring into the space of crypto such as the metaverse and NFTs, which received $30,000 worth of venture capital investments in the last year, according to PitchBook.



A few altcoins are cosmos Terra Luna, and Polkadot and are trading at around 20.5% 38%, 20.5% and 25.5% year-to-date, respectively, According to coinmarketcap.com.




Understanding the risks connected to the decentralized financial system and its risks is going to be one of the biggest challenges facing investors by 2022, said Lily Francus, director of quantitative research strategy at Moody's Analytics.



Cryptocurrencies "are likely to remain extremely volatile for the foreseeable future, but there are some major players on the institutional and retail side that are growing, meaning that interest continues to grow," said Oanda's Moya.




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