We've been somewhat skeptical about the hype around crypto currencies, particularly about its role as a potential portfolio diversifier. Indeed, over the past several months, Bitcoin (and other crypto currencies) have moved largely in line with the NASDAQ Composite. Just as with speculative growth stocks, the specter of rising rates, has hit Bitcoin hard. As with the technology-heavy NASDAQ, Bitcoin peaked in November; reaching $69,000 around the time that infamous Matt Damon crypto ad first aired. Since then, the NASDAQ has fallen nearly 25%, while Bitcoin has dropped almost 55%. That's in line with its ~2x beta to equity markets in recent years--not what you want to see from your "diversifying" asset class, especially one that is supposedly an inflation hedge.
Now, new data from blockchain organization Glassnode indicates that 40% of Bitcoin holders maybe underwater on their investments and that both whales and shrimps have been sellers. "Accumulation among small-scale holders— those with less than 1 bitcoin [and who have been among Bitcoin's strongest supporters] — is notably weaker now than it was in February and March." Analysts from Glassnode also noted "an influx of “urgent transactions” [recently]...in which investors paid higher fees...in order to expedite transaction times. Great, liquidity is also an issue.
Still, if you bought Bitcoin before January 2021, you're breaking even. And if you were lucky (or prescient) enough to purchase some crypto currencies at the beginning of 2020, you are doing just fine. Yes Matt, fortune does favor the brave, but in financial markets it's usually the early bird that gets the worm.
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