In 2022 so far, the crypto market has been on a downward trajectory upon global unrest, high inflation, and risk aversion. Since the all-time highs in November last year, the two largest cryptocurrencies Bitcoin and Ethereum have kept finding new lows, while being highly correlated to risky assets and particularly technology stocks. We expect the aforementioned high correlation between cryptos and stocks to continue in the foreseeable future, and as a consequence, crypto may not provide the same diversification to a high-risk portfolio as previously assumed. The downtrend has also been fueled by crypto-specific events such as bankruptcies of market participants, the resulting contagion and not least reservations about the highly unregulated market.
The major crypto event we are looking forward to is the upcoming merge of Ethereum planned for the 14th or 15th of September. The merge is a major upgrade to the Ethereum network, intended to reduce Ethereum’s energy consumption by 99.95%, increase decentralization, and substantially decrease the yearly issuance of Ether. The latter means that holders of Ethereum experience a smaller dilution from the issuance of new Ether compared to before the upgrade. It is in our view one of the largest events in the history of crypto. It seems the market has the same interpretation since the Ethereum-Bitcoin pair has been steadily increasing over the past months. This is highly unusual in a bear market, in which Bitcoin has historically outperformed all other cryptocurrencies.
If you are looking to trade Cryptos we offer either Crypto FX which is easy and fast to trade as long or short just like any FX Cross, the cost of carry are fairly high though, for longer term investments, there is a broad selection of exchange traded notes: