Crypto winter despite hopes of new peak levels
When last year came to an end, it was with hopes that 2022 would be the year when pandemic and economic unrest were left behind. As recently as November, both Bitcoin and Ether showed strengths at peak levels of over $ 67,000 (Bitcoin) and $ 4,800 (Ether), which led many crypto investors to expect even higher levels in 2022, especially as US inflation data gained momentum and showed at significantly higher levels than central banks had expected.
When last year came to an end, it was with
hopes that 2022 would be the year when pandemic and economic unrest were left
behind. As recently as November, both Bitcoin and Ether showed strengths at
peak levels of over $ 67,000 (Bitcoin) and $ 4,800 (Ether), which led many
crypto investors to expect even higher levels in 2022, especially as US
inflation data gained momentum and showed at significantly higher levels than
central banks had expected.
However, there have been no new top levels and the price of Bitcoin has instead fallen over 70 percent and is now trading around 20,000 USD while Ether has fallen to around 1000 USD, or almost 80 percent from the top.
For the investor who has been in
cryptocurrencies for more than the past two years, however, the recent crash
will not come as a major shock, as Bitcoin in 2017 rose from around 700 USD to
a maximum of close to 20,000 USD before the price even then fell sharply to
just over $ 3,000 as a minimum.
Despite a fall of more than 80 percent, however, the crypto world did not die in 2018, nor will it this winter. Instead, the fall in prices may mean an opportunity for investors to accumulate more coins if the cryptographers take off again.
For those who are surprised to see how crypto prices have fallen despite US inflation rising to a 40-year high, it has little to do with the role of cryptocurrency as an inflation hedge, but more with the fact that correlation is not a constant measure, but changes over time during various market events. During periods of high inflation, for example, the correlation between different asset classes tends to rise.
The timing of the most attractive position to invest in crypto is, as with all other assets, difficult to pinpoint. But, if the future will repeat similar patterns as those we have seen before (there is no certainty though), the decline will usually be about a year before another couple of years of cancer, which will eventually turn into an upside rally. This means that even if we have not really seen a bottom yet, it may still be time to slowly start scaling in at these levels.
This information is in the sole responsibility of the guest author and does not necessarily represent the opinion of Bank Vontobel Europe AG or any other company of the Vontobel Group. The further development of the index or a company as well as its share price depends on a large number of company-, group- and sector-specific as well as economic factors. When forming his investment decision, each investor must take into account the risk of price losses. Please note that investing in these products will not generate ongoing income.
The products are not capital protected, in the worst case a total loss of the invested capital is possible. In the event of insolvency of the issuer and the guarantor, the investor bears the risk of a total loss of his investment. In any case, investors should note that past performance and / or analysts' opinions are no adequate indicator of future performance. The performance of the underlyings depends on a variety of economic, entrepreneurial and political factors that should be taken into account in the formation of a market expectation.