It is a great week for those responsible for presenting the case of Bitcoin and Crypto as an invertible asset class. Although global markets have been ugly, unpredictable and fragile in recent times, digital assets remained stable with moderate volatility.
Bitcoin rose 5% and the Coindesk 20 index rose ~ 6% last week. In a landscape where traditional assets seemed to lose their balance, Crypto’s resilience offers an intriguing contravention of skeptics who have long questioned their legitimacy during market stress.
A week ago (April 6), I described the market as a bus staggering in a cliff. It could have been stimulating for business merchants, but it cannot be dedicated to managers of traditional asset portfolios. Of course, being the long value of equity could have seemed (and meaning) very well since the future fell on Sunday night (April 13), but monetizing them puts in an extremely chopped and high speed market is almost impossible, and forces Hedger to “call a background.” If it does not monetize puts and market rebounds, its decline stops to zero, blocking a loss. (Or, if its choice coverage was a retirement for US treasures. Uu., It was even worse).
The art of risk management in traditional markets is demonstrating to be increasingly difficult in this environment. Even professional merchants with decades of experience met the violent movements of the market. For those who manage pension funds, endowments or family offices, the challenge of preserving capital while maintaining the performance objectives has rarely been discouraging. The play book that worked during the last decade seems increasingly irrelevant.
Bitcoin resilience in the means of liquidations
In the midst of chaos, Bitcoin maintained a fairly narrow range. The two weakest periods, on April 7 and 9, were aligned with PERP liquidations (forced sales of leverage positions that are much more “standard practice” in cryptography than in traditional markets). This gave experts a practical “low” price to challenge Bitcoin’s aforementioned resilience, but we should go back here. Temporary settlement sauces are just that: artificial flows that are recoverable. They create a good lower wick, but they do not always represent the entire market fairly; We should rule out its relevance accordingly. (This can be a controversial vision; shoot if you don’t agree).
Store of Value vs. Safe Haven
As usual, experts and skeptics blur the claim “Store of Value” of Bitcoin with “quality flight” and “safe shelter”. We will continue hitting the drum on the difference between the assets of “refuge” and “value warehouse” flight “. Bitcoin, even in his adolescence and with limited access to traditional liquidity groups (that is, banks), are not expected to work as a flight refuge asset or a safe refuge during extreme volatile episodes. Similarly, there are no things that I don’t hope my children have in flight.
See the superior yield of Gold vs. Bitcoin this year supports this argument. Gold has better access to traditional finances, it is perceived that it is limited in supply and has a mature network. But does it have an adoption impulse? Is it an asset of the future? While gold shines in times of geopolitical and economic uncertainty, Bitcoin offers something different: a technological evolution in the concept of money itself, with adoption curves that continue to remind us that we are still early in their life cycle.
Michigan numbers: uncertain consumers -> Bitcoin Fuerte
The experience of cryptographic support of the week was limited by the consumer survey of the University of Michigan of April 11, which delivered two powerful data points that support Bitcoin’s price trajectory: the highest expectations for inflation of 1 year since 1981 (!) And the high expectations of unemployment.
Source: Michigan University
Source: Michigan University
We favor Bitcoin’s demand anchor to expected real interest rates: the difference between expected nominal rates and inflation expectations. When real rates are expected to increase, Bitcoin faces winds against. On the contrary, when real rates are expected to fall due to greater inflation and cuts of potential rates (hello, increased unemployment expectations), Bitcoin tends to benefit. The Michigan survey numbers provide a surprisingly clear North star for the accumulation of Bitcoin: 1) greater expected inflation and 2) unemployment expectations that could boost the decrease in food. Lower nominal rates, greater inflation.
This framework helps to explain the impressive Bitcoin performance during the previous flexibility cycles and suggests that we could be entering an equally favorable environment. The divergence between the expectations of consumer inflation and the most optimistic perspectives of the FED have historically, the consumer has often proven to be more prophetic than the Central Bank.
Beyond Bitcoin
With Paul Atkins now authorized to lead the SEC and other regulatory support developments, the broader cryptographic ecosystem shows promising signals. Can we expect the rest of the large-base COINDESK 20 index, which covers about 80% of the market, participate in a possible Bitcoin-Lider rally?
Two factors suggest yes.
First, asset correlations are rarely broken during the broad manifestations of the market in this sector.
Second, the dynamics of the pro-Blockchain bullish trend that we witness last November could reappear and revive interest in the block chains of layer 1 such as Ethereum, Solana, Sui, Cardano and Avalanche, infrastructure suppliers such as Chainlink and Filecoin, protocols Defi as UNISWAP and AAVE, AVE, AVA, SATIS OF FINANCIAL SERVICES and other sectors.
The potential of a broader rally suggests that diversification within cryptographic space could be rewarding again, particularly if regulatory tail winds continue to strengthen. The tide that Bitcoin raises rarely leaves other quality projects stranded.
