Bitcoin is leading the charge in a broader cryptocurrency recovery from the most recent sell-off, but can it buck the recurring trend this year of a temporary rally followed by more sell-offs?
Like traditional market assets like stocks and bonds, the raising of the federal funds rate by 75 basis points provided a temporary boost to the capital markets following the U.S. Federal Reserve announcement. But what’s been a recurring narrative this year, bitcoin and the rest of the cryptocurrencies proceeded to follow the stock market downward in subsequent days as investors absorbed the latest news and inflation fears continued to settle back into their minds.
“Bitcoin’s weekend dip was, to put it simply, not deep enough,” said Yuya Hasegawa, a crypto market analyst at Japanese bitcoin exchange Bitbank. “The macro environment has not really changed from last week’s FOMC meeting: there still has not been a clear sign of inflation coming down and the Fed may still drive the economy into recession by raising rates too aggressively or simply by failing to tame inflation.”
Hedge Funds Still Bullish on Crypto
Despite the recent weakness, hedge funds are still willing to add cryptocurrencies to their list of strategic exposure in search of alpha. According to PwC’s Global Crypto Hedge Fund report, more crypto hedge funds have emerged in recent years.
Whether or not many of them will last is another story, but it still underscores the notion that more investors are taking digital assets more seriously. That also comes amid the recent sell-offs this year.
“It’s the search for alpha. Everyone is always looking for an angle in,” John Garvey, global financial services leader principal at PwC, said to TechCrunch. “So how are you going to beat the benchmarks? You have to try something different and new and unorthodox.”
Investors looking to get digital assets exposure via bitcoin can look to exchange traded funds (ETFs) as a dynamic investment vehicle option. The ETF can give investors the option to get exposure to bitcoin without investing directly in the coin itself.
For investors worried about security via online cryptocurrency exchanges, the ProShares Bitcoin ETF (BITO) offers the opportunity to invest with confidence in a traditional market exchange — in this case, the New York Stock Exchange. BITO offers investors exposure to bitcoin via futures and getting correlated exposure to bitcoin prices itself, but as mentioned, while maintaining the regulatory framework of the traditional financial markets.
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