Markets and crypto may have initially been hopeful after Federal Reserve Chair Jerome Powell’s announcement of a 0.50% interest rate increase but underlying belief in a strong and resilient economy; those hopes have been dashed as markets plummeted on Thursday, with crypto no exception, reports CoinDesk.
The correlation between bitcoin and equities, particularly the S&P 500 and the Nasdaq, has long been discussed, with the largest cryptocurrency sometimes moving counter to equity performance and sometimes moving in tandem with it. What has been established is that while bitcoin may be uncorrelated in some ways, when it comes to large macro moves it goes along for the ride.
“Even though there was an initial surge in BTC, it is not isolated from these macroeconomic changes, and today’s price action reflects that,” said Joe DiPasquale, CEO of Bitbull Capital.
In trading on Thursday, bitcoin dropped 8.93% to a low of $36,289 as of writing and is the lowest the largest cryptocurrency by market cap has been since February. The S&P dropped 3.8% Thursday and the Nasdaq Composite fell 4.9%, highlighting the correlation between the bitcoin and the indexes during times of macro pressures.
Bonds haven’t faired any better, with the 10-year Treasury yield rising above 3% again.
Bitcoin has historically experienced a bounce-back in May but Matt Hougan, CIO of Bitwise Asset Management told Fortune that it’s likely not going to be the case this year.
“If the macro conditions calm down or normalize, I think we could have a strong summer,” Hougan said. “But right now, those macro factors are so strong that I don’t think the normal rules apply.”
Don’t Want Spot Exposure? Consider Crypto Assets
For investors who are interested in investing in the innovation of the crypto economy but do not want the risk of direct exposure, the Bitwise Crypto Industry Innovators ETF (BITQ) could be a good solution. BITQ offers investment into some of the largest companies within crypto in a variety of segments, offering the potential benefits that come with diversification.
BITQ tracks the Bitwise Crypto Innovators 30 Index, an index with at least 85% allocation into cryptocurrency exchanges carrying bitcoin and other cryptocurrencies, crypto miners, mining equipment companies, and service providers. The remaining 15% is allocated to large-cap support companies with at least one major part of their businesses dedicated to crypto.
BITQ carries crypto companies that continue to drive growth for themselves as well as the broader crypto economy.
The fund has an expense ratio of 0.85% and net assets of almost $93 million.
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