Bloomberg Intelligence’s Crypto Outlook report analyzed by Mike McGlone and Jamie Douglas Coutts claims that Bitcoin (BTC), Ethereum (ETH), and altcoins within the Bloomberg Galaxy Crypto Index (BGCI) will outperform all other things once financial markets return to bullishness.
Bitcoin Could Become a Risk-off asset
Analysts at Bloomberg say that digital asset markets could flourish as Bitcoin becomes a risk-free asset rather than being tightly correlated with stocks.
“That the lone major asset class to rally in 1H – commodities – may have logged an enduring peak has implications for a bottom in Bitcoin. When the ebbing economic tide turns, we see the propensity resuming for Bitcoin, Ethereum and the Bloomberg Galaxy Crypto Index to outperform most major assets. Rate hikes by more central banks than ever is a strong headwind,” he said.
“But it’s the potential for the benchmark crypto to shift toward becoming a risk-off asset like gold and US Treasurys, that may play out in 2H. Since 2014, October has been the best month for Bitcoin, averaging gains of about 20%, and in 3Q the BGCI advanced about 16% vs. 5% declines for the Nasdaq 100 and S&P 500. Ethereum’s transition to proof of stake may be helping it build a base above $1,000 and Bitcoin about $20,000,” added him.
It is possible for ETH to become more stable during macro bear markets than traditional financial instruments, according to the strategists.
“Ethereum took a leap forward with the merger to proof of stake in September, with implications for its price performance. The No. 2 crypto has a tendency to respect support and resistance at major round numbers, and $1,000-$2,000 has been its cage,” he said,
“About $1,000 is key support and our graphic shows Ethereum outperforming the Nasdaq 100 Index in 3Q. The nascent technology and more volatile No. 2 crypto has a tendency to outperform the stock index on the way up, but the merge may mark an inflection point of Ethereum also beating the Nasdaq 100 when it declines,”” he detailed.
Bitcoin May be Moving to Acting Like “Digital Gold”
According to data released by Kaiko Research on Oct. 4, Bitcoin is beginning to act more like “digital gold.” In the wake of a strengthening of the US dollar and rising interest rates, Bitcoin’s correlation with gold reached its highest level in more than a year at +0.4.
Correlations of +1.0 indicate that movement between two assets is equivalent, for instance, a 10% increase in gold would be matched by a 10% rise in Bitcoin if the two coins had a correlation of +1.0.