Bitcoin slumps to a six-week low … but adoption continues to grow … what our experts Luke Lango and Charlie Shrem see coming … a Crypto Cash Calendar event today
This past Monday, bitcoin slumped to a six-week low, hitting $38,423.
As I write Wednesday morning, prices are only slightly higher, trading at roughly $38,700.
This weakness represents a continued shift in how investors have viewed bitcoin and the broader altcoin market here in 2022.
Specifically, whereas these assets were deemed “inflation hedges” throughout 2021, this year, they’ve become “risk assets.” And like just about all other risk assets, they’re getting dumped.
Below, we look at bitcoin (in green) versus the yield on the 10-year Treasury (in black) since January 1, 2021.
You’ll see that, yes, bitcoin’s price did generally follow the 10-year Treasury yield in 2021, suggesting it was an inflation hedge. But when 2022 hit, there was a complete breakdown.
The circled gaping divergence speaks for itself.
Our crypto experts Luke Lango and Charlie Shrem spoke to this bitcoin/10-year Treasury yield relationship in their latest issue of Crypto Investor Network:
Bitcoin’s correlation with the 10-Year Treasury yield – which persisted throughout large parts of 2021 – has completely broken down.
Over the past month, the two are almost perfectly anti-correlated, so the “Bitcoin is digital gold” thesis is being completely disregarded by the market.
Instead, the “Bitcoin is a risk asset” thesis is the one the market is honing in on right now. Bitcoin’s correlation with the ARK Innovation ETF has turned enormously positive in 2022 and remains very strong today.
To that end, we continue to believe that we have to treat Bitcoin like the Nasdaq, and altcoins like hypergrowth tech stocks.
Stocks are getting hit hard right now by a surging 10-Year Treasury yield, hawkish Fed commentary, and recession fears. So long as that three-headed monster of risks remains, stocks and cryptos will struggle side-by-side.
If you read yesterday’s Digest, you know that Luke is predicting more pain for stocks over the next month or two. He believes we’ll either enter a bear market or get mighty close.
But on the far side of that pain is a massive rally for top-tier technology stocks. And given the correlation between tech and crypto today, that suggests a similar down-then-up roadmap for crypto too.
***In the meantime, look beyond bitcoin’s price to its increasing global adoption
In the grand scheme of things, bitcoin and altcoins are still in their infancy. And any new asset class is going to experience massive volatility as it struggles to grow from “weird and unknown” to “familiar and popular.”
Given this, perhaps more important than bitcoin’s daily price fluctuations is its progress toward mainstream adoption. And when we check in on this progress, we find bullishness.
Yesterday, we saw the Central African Republic accept bitcoin as legal currency. The country joins El Salvador in making bitcoin legal tender.
Meanwhile, bitcoin’s use as a currency here in the U.S. is increasing as well.
From Seeking Alpha:
Is bitcoin (BTC-USD) going to become a widely used medium of exchange?
Its lack of acceptance as a means of payment among merchants, as well as its high transaction costs, “is now changing,” Morgan Stanley analyst Sheena Shah wrote in a note to clients Thursday…
A slew of payment companies, in particular, are looking to expand their reach in the growing decentralized space.
For example, payments firm Strike recently teamed up with point-of-sale supplier NCR (NCR) and rewards-based payments firm Blackhawk Network, which “could mean that a large number of physical stores, restaurants and cafes in the US will be able to accept bitcoin payments in the near future,” Shah explained.
Finally, earlier this week, Fidelity Investments announced plans to allow investors to put bitcoin into their 401(k)s.
From Dave Gray, Fidelity’s head of workplace retirement offerings:
We have seen growing and organic interest from clients.
We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near term and long term.
Yes, bitcoin’s price is weak. No, that doesn’t reflect bitcoin’s future.
***Expect more short-term volatility, especially for smaller altcoins
In their update, Luke and Charlie reveal an interesting dynamic they’re seeing play out in the crypto sector right now:
…We have observed that the majors – Bitcoin, Ethereum, etc. – have meaningfully outperformed altcoins in 2022. Indeed, the smaller and “riskier” the crypto, the more it has fallen this year.
Year-to-date, Bitcoin is down 12% while Ethereum is down 17%. Not great.
But really good when compared to other altcoins. Avalanche is down 23%. Polkadot is down 31%. Uniswap is down 48%. Algorand is down 57%.
We believe the crypto markets are presently consolidating around the majors because near-term risk appetites are depressed yet long-term bullish sentiments remain.
Of course, the exaggerated volatility of smaller altcoins cuts both ways. While fear can send any given altcoin lower by double-digits, any type of meaningful bullish catalyst can drive them higher in the same way.
As just one example, earlier this month, Luke and Charlie sent out a Profit Sell Alert. They recommended Crypto Investor Network subscribers lock-in 50% gains on one-third of their position in a top-shelf altcoin they’d recommended. The more interesting detail is they’d held the altcoin for only two weeks.
Clearly, even in a bearish environment, these types of sudden price pops can happen. The question is: Can you get in position ahead of time?
***On that note, I’ll point you toward Luke and Charlie’s Crypto Cash Calendar
Here’s Luke and Charlie, explaining what this is:
Crypto is the future. But that doesn’t mean all cryptocurrencies are the future.
To sift through all the blockchain noise, we’ve put together an exclusive team of crypto engineers and coders to collectively research, analyze, and understand the core technologies underlying the cryptocurrency revolution.
Informed by this research, we’re able to interpret the usefulness and potential impacts of those technologies.
Here’s how it works: Behind the scenes, our proprietary research system gathers information and indicates which altcoins and crypto events are of particular interest.
From there, we’ll share with you the most exciting and promising of those coins and events in our Crypto Cash Calendar.
It turns out, today, Luke and Charlie are announcing news that’s triggered their Crypto Cash Calendar system.
I don’t know what the news is, or the altcoin it impacts. But I do know that the last time this Calendar flagged something was on March 22nd. The related altcoin proceeded to climb 17% over the next eight days. To get access to the Crypto Cash Calendar as a subscriber, click here.
Returning to the broader sector and what’s in the forecast, here’s Luke and Charlie with the final word:
We’re expecting further volatility in the crypto markets. But we believe that amidst that volatility, we will continue to see consolidation around the majors, and that the majors will meaningfully outperform…
We further expect this volatile period to prove short-lived, and end with a positive resolution.
Therefore, as soon as price action farther out on the risk curve starts improving, we will start taking bites on smaller altcoins again.
Have a good evening,
Jeff Remsburg
