just ten days ago, Bitcoin There was a slide towards the psychologically important $25,000 level. Today, it is back at $21,300.
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It read as a cautionary tale for investors who were beginning to see a slight bit of optimism creep in. With hell to be had for 2022 crypto investor. So far, July had provided a rally.
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However, with Share Market Falling during the past week on – you guessed it – macro concerns, bitcoin followed right along for the ride. As is the habit.
The chart below is a simple one, but it is always so powerful in the current climate. I plotted bitcoin S&P 500 Year after year, it’s showing how together the two are. In other words, if the stock market has moved up, bitcoin has followed.
As much as I love on-chain analysis, studying moving averages or looking at areas of resistance and support, the reality is that in the short term, bitcoin is just following the market. It has been established as a risky asset, and in a risk-averse environment, they are not the risky assets investors want to be.
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I wrote Assessing whether this was a good time to buy during the recent bear rally. My main conclusion was that I didn’t know whether we were down or not and that there could easily be more pain to give. Despite this, I concluded that even with a longer investment horizon, it was still a good time to buy the stock market.
We have loads of history and, while I’m increasingly negative about the economy’s prospects for the winter, I don’t think the Federal Reserve will let a recession get too ugly without resisting the urge to flick back the money printers. as well as reducing their dogma regarding interest rates.
I’m bearish on the economy if that makes sense, still wondering if you can tolerate volatility in the short term, it’s not a bad time to start dollar-cost-averaging (going forward at regular intervals) buying stock on .
Bitcoin
For bitcoin, it’s a bit trickier. It’s a very volatile asset and we don’t have a long sample space in our favor – bitcoin was only invented in 2008. Furthermore, it is only in the last few years that it can be studied as a mainstream financial asset, so any price history prior to that is quite controversial.
Those familiar with my writing understand my long-term bullish take on bitcoin. I believe it has a place in everyone’s portfolio – as a hedge against “Financial Armageddon”. But in the short term, it is only following the macro. This means that if the stock falls, Bitcoin will fall further – as the chart in the above paragraph shows.
As for me, I’m focused on adding to my stock position here, although it comes back again – with the caveat that I already have enough bitcoin in the context of my portfolio. Given the overall expected return/risk profile of my portfolio, stocks are playing judiciously for me here.
And at the end of the day, it all comes down to this: taking a holistic portfolio approach and trying to stay stable on your investment goals and time horizon while keeping emotions out.
Of course, this is easier said than done, especially in the world of bitcoin. But let last week be another caveat—as if we need it—that things aren’t always as they seem. Make no mistake, we are still in a difficult position, and bitcoin is just as vulnerable as any asset right now.
