Home Latest News Hard Times in Crypto Lead to Price and Macro Risk – Yahoo...

Hard Times in Crypto Lead to Price and Macro Risk – Yahoo Finance

Don’t miss CoinDesk’s Consensus 2022, the must-attend crypto & blockchain festival experience of the year in Austin, TX this June 9-12.
“There is, in general, a lot of what we call ‘grift’ in the space, where 99.9% of the crypto projects out there probably don’t solve anything.” – some guy
Oh, gosh, here we go … except that some guy was this guy. It was me. I said that. I went on TD Ameritrade Network to chat crypto, and given the breadth of things I wanted to discuss I’m co-opting that appearance to power the next few newsletters because there wasn’t enough time to cover everything.
I want to cover the big risks as we enter Hard Times in Crypto, now that bitcoin is down over 50% in 2022. The main, big risks I’m paying attention to are:
Price and macro risk
Platform and protocol risk
Public company risk
I’ll take each of these week by week for the next three newsletters: This week is price and macro risk, next week we’ll cover platform and protocol risk, and the week after public company risk, just in time for CoinDesk Layer 2’s “Future of Work Week.”
So … from the top.
– George Kaloudis
Before that though, it’s worth mentioning there’s a lot of general market stress. There aren’t many places to hide. Even cash is being gobbled up by 8.6% inflation, according to the U.S. Consumer Price Index. Unless you’re strictly invested in commodities (which you aren’t), your portfolio is probably not having a good time.
You’re reading Crypto Long & Short, our weekly newsletter featuring insights, news and analysis for the professional investor. Sign up here to get it in your inbox every Sunday.
Bitcoin (BTC) is flirting with price levels that would have been considered highs in December 2017. That was when bitcoin first touched up against $20,000, only to fall precipitously, then scratch and claw for three years to reach $20,000 again by December 2020. Bitcoin’s price has fallen out of the $30,000 range over the last week and it has come dangerously close to breaking down below $20,000.
It might sound painfully obvious to point out that “bitcoin’s price going down is not good,” but … uh … bitcoin’s price going down is not good. This is true for all assets, but it’s especially true for bitcoin.
In late 2020, there was lots of chatter about institutional adoption of bitcoin. Much of the response from institutions was “we can’t take bitcoin seriously until it’s at least a $1 trillion asset.” But then bitcoin did become a $1 trillion asset; so BlackRock (BLK) entered the chat and people started talking about bitcoin as a new type of reserve asset. Counterintuitively, as the value of bitcoin goes up, it becomes more, not less, investable.
Coupled with the price risk is macro risk: The Federal Open Market Committee (FOMC) meeting last week signaled a 75 basis point increase to interest rates. And, as expected, the stock market surged.
Except.
That’s literally the opposite of what you’d expect to happen. Perhaps the market was happy that Federal Reserve Chair Jerome Powell called the 75 bps move “unusually large.”
In any event, stocks went up during Powell’s prepared remarks. And so did bitcoin, which I guess is good. But with inflation proving itself a formidable foe and the possibility of recession looming, keeping a close eye on the Fed is critical. It’s important, not only from the angle of assessing if the U.S. can right the ship, but also from crypto’s perspective, given bitcoin’s vascillation from risk-on to risk-off to neither at a moment’s notice. If the world’s biggest economy struggles to recover, that could spell doom or opportunity for bitcoin, depending on how you view it.
Time will tell.
Meanwhile, while trawling through data to back up the notion that interest rate increases should lead to lower stock prices I came across something interesting. Looking at the 30-day correlation of bitcoin to 10-year U.S. Treasury yields and the Nasdaq to 10-year U.S. Treasury yields, these relationships have been scattered in the second quarter. These correlations moved from somewhat negative to somewhat positive correlation and moved sharply toward somewhat negative in the last few weeks.
When Treasury yields go up, that’s either because interest rates have increased or demand for Treasurys has fallen. This might be counterintuitive, but in order to get someone to buy a Treasury the seller would have to sell it for less if fewer people want it, which increases the yield (since yield takes the price you paid for the instrument into account). Higher interest rates mean that investors could get higher interest on Treasurys from the government, so they’ll pay less for already issued Treasurys with lower interest rates.
All said, given we are in a rising interest rate environment, I expected this relationship to be negative. At least, I expected it to be consistent. As yields go up because of increased interest rates, risk-on assets like stocks (and sometimes bitcoin) should go down. Perhaps investors remain unconvinced that we are headed toward a recession so yields are up because of suppressed demand for Treasurys. Maybe investors believe that a supply-driven economic slowdown will prove less potent than a demand-driven one.
My take is that markets were expecting higher interest rate hikes and signaling that more heavy hikes were on the way, so the previously priced-in doomsday scenario was undone after the announcement.
Like I said above: Time will tell.
Related Quotes
Shares of Roku (NASDAQ: ROKU) climbed sharply higher on Thursday — even as the broader market slipped — jumping as much as 9.4%. The catalyst that sent the streaming pioneer higher was speculation that the company could be on the verge of being acquired. The rumor mill went into overdrive that Roku is preparing to be acquired, according to Dealreporter (as reported by The Fly).
Yahoo Finance's Jared Blikre discusses how Adobe stock is moving after it announced earnings and a deal with online design tools maker Figma.
Crazy as it might sound, you can thank the U.S. U.S. Bureau of Labor Statistics (BLS) for that. As you'll recall, back on Tuesday the BLS announced that inflation had inched up 0.1% sequentially in August, rising to 8.3%. According to BLS figures, airline fares declined 8.8% between July and August, making it cheaper, and more attractive, to take a cruise vacation.
Another REIT is being taken private in a big all-cash buyout, but the purchase price might end up even higher.
Warren Buffett is one of the best investors of all time. Since 1965, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B), the masterfully crafted conglomerate he helped build, has returned over 20% annually, creating fortunes for its shareowners along the way. Berkshire's public stock portfolio is thus closely watched by investors seeking to build lasting wealth in the stock market.
Warren Buffett's Berkshire Hathaway bought a bunch of stocks during the second quarter. Notable names included Apple (NASDAQ: AAPL), Activision Blizzard (NASDAQ: ATVI), Occidental Petroleum (NYSE: OXY), and Chevron (NYSE: CVX). Buffett seems to be most bullish on Apple and Occidental Petroleum.
In this piece, we will take a look at the 13 best semiconductor stocks to buy now. If you want to skip the details and jump ahead to the top five stocks in this list, then take a look at the 5 Best Semiconductor Stocks to Buy Now. The high technology sector is a double […]
Barrick Gold (GOLD) has been one of the stocks most watched by Zacks.com users lately. So, it is worth exploring what lies ahead for the stock.
In a world where the stock market is unpredictable and interest rates are rising, many investors are looking for someplace to put their money that is as close to risk-free as possible – even if it means forgoing the chance … Continue reading → The post How to Buy More than $10,000 in I Bonds Through This Loophole appeared first on SmartAsset Blog.
Shares of Medical Properties Trust (NYSE: MPW) have been under a lot of pressure this year. The real estate investment trust's (REIT) stock has lost a third of its value due in part to rising interest rates. While the market has concerns about the REIT's ability to continue growing its portfolio and dividend, it recently took a big step to address those worries.
Over the next 12 months, Zillow predicts that U.S. home values will climb 1.4%. Here’s the forecast for your local housing market.
Ark Invest has added to its DraftKings (NASDAQ: DKNG) stake for seven consecutive trading days through Tuesday's close. It's clear that Cathie Wood — the co-founder, CEO, and stock picking mastermind of the Ark Invest family of exchange-traded funds (ETFs) — has taken a shine to the online wagering specialist. Ark Invest now owns 5% of DraftKings' shares outstanding.
In this video, I will talk about the recent SoFi (NASDAQ: SOFI) upgrade by Bank of America analyst Manav Bhatia. The bank upgraded SoFi from neutral to buy and raised its price target from $8 per share to $9 per share.
Electric vehicle (EV) maker Rivian (NASDAQ: RIVN) said recently that it is partnering with Mercedes-Benz Group to produce large electric vans in Europe. Rivian and Mercedes will share a factory in Europe, an unspecified plant that Mercedes already owns, to build two large electric vans. One will be based on Mercedes' electric van architecture (called VAN.EA) and the other will be based on Rivian's second-generation electric van, called the Rivian Light Van (RLV) platform.
QuantumScape (NYSE: QS) has gotten a lot of attention from investors lately. And for good reason, since the battery start-up's technology could prove revolutionary. But it could also be a flop. Motley Fool contributors Jason Hall and Jeff Santoro discuss the company, its prospects, and a few things investors need to consider before buying shares.
Shares of Phillips 66 (NYSE: PSX) fell as much as 5.6% by 11:30 a.m. ET on Thursday. The primary factor weighing on the refining stock was lower oil prices. Crude oil prices continued their recent slide today.
Inflation is high and interest rates keep rising, leading to a lot of speculation about the housing market, with many throwing around the word “crash.”
Yahoo Finance's David Hollerith explains what the completed ethereum merge means for blockchain projects and the crypto industry.
Ford is throwing a bone to its traditional Mustang fans, but maybe not for much longer. Ford took the wraps off the latest Mustang, the seventh generation, at the Detroit Auto Show. As of right now the 2024 Mustang will come with two powertrains – a 2.3L EcoBoost 4-cylinder engine, which Ford says has improved fuel efficiency, along with a more powerful 5.0L ‘Coyote’ V8.
Yahoo Finance Live anchors discuss stock performance for Adobe after the computer software company announced it will acquire design software firm Figma for $20 billion.

source

Previous articleAll you need to know about the upcoming DOGE update 1.46.6 – Finbold – Finance in Bold
Next articleUnderstanding Nonfungible Tokens (NFTs) and the 'Bored Ape' Boom and Bust – Bloomberg
She has been writing columns on consumer gadgets for over 2 years now. Her areas of interest include smartphones, tablets, mobile operating systems and apps. She holds an M.C.S. degree from Texas A&M University.