Bitcoin soared more than 10% this week, outperforming stocks

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A visual representation of Bitcoin.

Edward Smith | Getty Images

Cryptocurrencies rose this week even as US stocks briefly pulled back from their New Year’s rally and a major crypto lender filed for long-awaited bankruptcy.

Bitcoin was last up around 12% for the week, according to Coin Metrics, while ether was up 14%.

By comparison, two of the three major stock averages were on track to post a losing week, which was shortened for the Martin Luther King holiday. The S&P 500 and the Doe Jones Industrial Average fell 0.9% and 2.9% respectively for the week. The Nasdaq Composite, however, was the best performer. It is up slightly for the week and gained 5% for the year, leading the other major indexes.

Bitcoin and Ether rose 2.73% and 2.15% respectively over the same four-day period.

“Bitcoin appears to be trading again with the Nasdaq and risky assets, after the last few months of decoupling,” said Sylvia Jablonski, CEO and Chief Investment Officer at Defiance ETFs. “This is good news for crypto investors in that if inflation drops and the Fed is closer to the end than the start of economic tightening, risky assets will get a breath of fresh air and may attract investors again.”

Bitcoin has traded in lockstep with stocks for most of 2022 as institutional investors entered the crypto market the year before and government stimulus and monetary policy tightening in the Federal Reserve have become the main price drivers.

In the later part of the year, however, this correlation eased and the price of bitcoin remained relatively stable amid a wave of crypto industry scandals and bankruptcies and general loss. confidence in the asset class.

Jablonski said bitcoin has enjoyed performance gains this week, with short-term sentiment favoring Nasdaq stocks. How it holds will depend on the Fed’s continued tightening trajectory and whether or not the economy is pushed into a recession, she added.

The rise in crypto prices this week also comes amid the latest blow to the industry: Genesis, one of the largest crypto lenders and one of FTX’s largest unsecured creditors, has filed for bankruptcy. late Thursday evening.

Owen Lau, an analyst at Oppenheimer, said the crypto’s rise this week was an extension of the rally in risk assets that took place in the first two weeks of the year.

“Bitcoin and digital asset stocks have been oversold over the past year,” he said. “These assets more than factored in the negative news from the FTX collapse, BlockFi bankruptcy and Genesis fallout.”

Investors and others are still wondering what potential second- and third-order effects could come from the recent explosions.

However, Defiance’s Jablonski warned that if there were more similar explosions in crypto, digital assets might not just decouple from trade as a risky asset, but instead start trading as a ” undesirable asset that causes investors to panic”.

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