Crypto Market Signals Reversal as Blockchain ETFs Take the Lead
After facing a huge sell-off in the past few trading sessions, the cryptocurrency market seems to be on the verge of recording a temporary rebound with blockchain and crypto related ETFs taking the lead.
With respect to the top performers in the non-leveraged ETF category, the Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ) gained 10.30%. Likewise, the Global X Blockchain ETF (BKCH) rose by 10.50%. While the VanEck Vectors Digital Transformation ETF (DAPP) surged 13%, the Bitwise Crypto Industry Innovators ETF (BITQ) recorded a growth of 11.60%. Also, the Amplify Transformational Data Sharing ETF (BLOK) posted a rise of 7.3%.
The jump in cryptocurrency sector-related stocks and digital currency mining firms indicate that investors trust the latest market reversal was over blown as market was driven by risk off sentiment. However, the days ahead will reveal whether the latest bounceback is permanent or simply a technical dead cat bounce.
The crypto market is expected to remain volatile as the regulatory overview is expected to only increase. The overall outflow of funds from perceived riskier assets paved way for halving the value of Bitcoin and the rest of the cryptos, wiping out more than $1 trillion worth crypto funds since November.
Interestingly, the notion of Bitcoin and rest of the digital currencies being referred to as hedge against inflation has been proven wrong. The rise in inflationary pressure has forced the US Fed to turn hawkish and implement aggressive rate hikes, which economists are worried about. In fact, economists have opined that the steep interest rate hikes could pave way for a global recession. Subsequently, riskier assets such as cryptos have faced the worst sell-off compared to traditional markets.
The price volatility has considerably increased with the arrival of institutional investors who are now taking the lead instead of retail investors. Interestingly, the deep sell-off has caught many of the large investors off guard.
The crypto market selloff also had a negative impact on stocks of cryptocurrency exchanges such as Coinbase (COIN), which recorded an 85% decline in share prices from the peak recorded in November. In fact, the share price of Coinbase has declined by 50% in the last week.