By Anna Peel. Originally published at ValueWalk.
“The crypto world’s hopes for assets like Bitcoin to achieve digital gold status have evaporated as speculators have headed for the exit as the crisis in Ukraine has deepened. Because of its fixed supply Bitcoin had been hyped as a potential safe haven in times of higher inflation and market volatility, but instead has swung wildly down as equity market sell offs have intensified. Crypto assets have been shown to be highly sensitive to the fortunes of the stock market and were propelled higher in an era of ultra cheap money. As conflict in Ukraine looks set to be yet another inflationary driver with oil spiking again, up 8% at $104 a barrel there is fresh speculation that central banks could be forced into more unexpected monetary policy moves, with an acceleration of rate hikes potentially on the cards. With huge uncertainty around how deep the Ukraine conflict could go and what ripple effects there could be in financial markets, crypto assets are likely to continue to be highly volatile.
Q4 2021 hedge fund letters, conferences and more
Expectations Of A Steep Crypto Recovery
By contrast gold has come to the fore again as a traditional safe haven, rising by 1.5% to $1937 an ounce just as Bitcoin fell again by almost 3%, to $35,700. It’s now down by a quarter since the start of the year. The recent falls may drive more crypto fans into the market in expectation of a steep recovery to come. But as we’ve seen with its rollercoaster ride so far, it’s unlikely to stay there for long.
If there are fresh price spikes in 2022 it’s likely to concentrate minds further amongst central bankers and regulators as surges in crypto prices often see more retail speculators entering the market hoping to catch a ride upwards. Regulators are still intensely worried about vulnerable consumers getting caught out, particularly when far too many are not financially resilient with a cost of living crisis looming in many parts of the world.”
Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown
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