- Crypto markets ran red at the start of the week.
- However, Bitwise’s CIO has three pieces of advice to investors.
Crypto investors would be forgiven for experiencing fear, uncertainty, and doubt — or FUD as it’s abbreviated in industry parlance — after a mass sell-off saw crypto’s total market value plunge 18% to $1.8 trillion on Monday.
However, Bitwise Chief Investment Officer Matt Hougan says traders’ fear is misplaced and obscures a huge opportunity.
“Historically, whenever we’ve seen this kind of global economic panic, crypto has traded down initially but ended higher over the next year,” Hougan wrote in a research note.
Crypto and stock markets on Tuesday recovered somewhat from the bloodbath, which saw Bitcoin crash to below $50,000 on Monday for the first time since February.
Here are three reasons Hougan sees hope among the FUD.
Fed rate cut
White-knuckling crypto pundits responded to the weekend wipeout by begging the Federal Reserve to cut interest rates and add some liquidity to the market.
Riskier assets like cryptocurrencies usually do well when liquidity flows into the market.
“So is the money printer coming? If history is any guide, yes,” Hougan said. “It happened during Covid. It happened after the eurozone crisis in 2010. And it happened in 2008. If the events of this weekend lead to real economic unrest, it will happen again.
The market has increased the odds of a rate cut from 11% to 98% by the central bank’s September meeting, Hougan added.
Time to Buy
Hougan said this weekend’s events are reminiscent of March 2020 when Bitcoin plunged 37% to $4,971 on the back of Covid-19-fuelled panic.
However, as the Federal Reserve cut interest rates and liquidity was put back, Bitcoin began to rise.
A year later it was at 1,000%, trading at $57,332.
“In retrospect, March 12, 2020 wasn’t a time to panic. It was the best buying opportunity for Bitcoin in a decade,” Hougan said.
The Covid panic showed that the central bank will step in when the economy is in danger, and it supercharged the reasons that Bitcoin is a good long-term store of value, he said.
“I see the same setup today,” Hougan said.
Ignore the short term
Ultimately, trying to time the market is a fool’s errand, Hougan said.
Bitcoin is an investment in a financial revolution and more than an investment in a highly volatile tradeable asset, he argued.
“Resist the urge to look at intraday prices, and focus instead on where bitcoin could be next year, in five years, and in 10 years,” Hougan said.
Crypto market movers
- Bitcoin is up 7.3% over the past 24 hours to $55,094.
- Ethereum is up 9% to trade at $2,456.
What we are reading
Bitcoin’s still a Trump trade — and data can’t always be trusted — DL News
Bitcoin and Ethereum Funds Record $546 Million in Weekly Outflows: CoinShares — Unchained
SEC Pushes Back On Coinbase’s Document Request — Milk Road
How Japan is triggering the crypto market selloff — and why Bitcoin’s price can benefit — DL News
Reach out to the author at joanna@dlnews.com.
