Bitcoin increasingly operates like just another technical stock

San Francisco – Bitcoin It has been recognized for more than a decade as “digital gold,” a long-term store of value that would counter broader economic trends and provide a hedge against inflation.

But Bitcoin collapse price Over the past month, it appears that the vision is far from reality. Instead, traders are increasingly treating cryptocurrency as just another speculative technical investment.

Since the beginning of this year, bitcoin’s price action has closely mirrored that of the Nasdaq, a heavily weighted benchmark toward tech stocks, according to an analysis by data firm Arcane Research. That means that with bitcoin’s price down more than 25 percent over the past month, to less than $30,000 on Wednesday – less than half its peak in November – the plunge approached with a broader crash in tech stocks as investors grappled with rising interest rates. The war in Ukraine.

The increased correlation helps explain why those who bought the cryptocurrency last year, hoping it would become more valuable, have seen their investment crater. And while bitcoin has always been volatile, its growing resemblance to risky tech stocks starkly shows that its promise as a transformative asset is unfulfilled.

It delegitimizes the argument that bitcoin is like gold,” said Vetle Lunde, an analyst at Arcane. “Evidence suggests that bitcoin is just a risky asset.”

Arcane Research has set a numerical score between 1 and -1 to capture the pricing correlation between Bitcoin and the Nasdaq. Score 1 indicates a subtle correlation, which means that prices move in tandem, and -1 represents a subtle difference.

Since January 1, the Bitcoin-Nasdaq 30-day average score is close to 1, and has reached 0.82 this week, which is as close to a precise one-to-one correlation as it gets. At the same time, the Bitcoin price movement diverged from the fluctuations in the price of gold, the asset with which it is most often compared.

The closeness with Nasdaq has grown over the course of the coronavirus pandemic, driven in part by institutional investors Like hedge fundsEndowments and family offices that pumped money into the cryptocurrency market.

Unlike the idealists who drove the initial enthusiasm for bitcoin in the 2010s, these professional traders take the cryptocurrency as part of a larger portfolio of high-risk, high-reward technical investments. Some of them are under pressure to secure short-term returns for clients and are less ideologically committed to Bitcoin’s long-term potential. And when they lose faith in the tech industry more broadly, it affects their bitcoin trading.

“Five years ago, people working in cryptocurrencies were crypto people,” said Mike Burrow, founder of investment fund Fortis Digital. “Now you have guys across the entire spectrum of risk assets. So when they get hit there, it takes a toll on themselves.”

Fears in the stock market – swayed by tough economic trends, including the Russian invasion of Ukraine and historical levels of inflation – have been particularly evident in the slump in technology stocks this year. Meta, formerly Facebook, is down more than 40 percent this year. Netflix has lost 70 percent of its value.

On Wednesday, shares of Coinbase, the cryptocurrency exchange, fell 26 percent after reporting Decreased revenue and loss of 430 million dollars in the first quarter. The company’s stock is down more than 75 percent overall this year.

Nasdaq already exists Bear Market District, having finished Wednesday down 29 percent from its mid-November record. November was also when the bitcoin price reached its peak of around $70,000. It was the accident Reality Check About Bitcoin Advocates.

“There was an undeniable retail belief that bitcoin at the end of last year was an inflation hedge — it was a safe haven, and it was going to replace the dollar,” said Ed Moya, cryptocurrency analyst at trading firm OANDA. “And what happened is that inflation started to get very ugly, and Bitcoin lost half of its value.”

The prices of other cryptocurrencies have also been crashed. The price of Ether, the second most valuable cryptocurrency, has fallen by about 25 percent since early April, to below $2,300. Others, such as Solana and Cardano, have also suffered severe declines this year.

Bitcoin has rebounded from heavy losses before, and its long-term growth continues to be impressive. Before the pandemic boom in cryptocurrency prices, it was worth well under $10,000. The true believers, who call themselves Bitcoin extremists, remain adamant that the cryptocurrency will eventually decouple from its association with the risky asset.

Michael Saylor, CEO of Business Intelligence micro . strategyHe spent billions of his company’s money on Bitcoin, creating a stockpile of over 125,000 coins. Due to the drop in the price of bitcoin, the company’s stock is down nearly 75 percent since November.

In an email, Mr. Saylor blamed the collapse on “traders and technocrats” who do not appreciate Bitcoin’s long-term potential to transform the global financial system.

“In the short term, the market will be dominated by those who underestimate the benefits of bitcoin,” he said. “In the long term, the extremists will be validated, because billions of people need this solution, and awareness is spreading to millions more every month.”