Cryptocurrencies are having a strong start to the year.Credit:Getty
While this year’s rally has boosted the confidence of many crypto investors,it seems likely that the good times might be coming to an end,with a number of analysts from major investment companies including Morgan Stanley and eToro predicting a stock market crash in the near future. Historically,sharp declines in stock prices tend to drag down the price of Bitcoin and other crypto assets.
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One such expert,Josh Gilbert,a market analyst fromeToro’s Australian trading desk,toldThe Chainsaw that the international investment firm is approaching the crypto market with a healthy dose of caution heading into March.
“We are short-term cautious on equities given the recent rally we have seen across the market,particularly with growth stocks. There are still plenty of headwinds with the inflation fight not over,rising bond yields and further rate hikes from the Fed,” said Gilbert.
Since 2020,cryptocurrency markets have traded in-line with US ‘growth’ stocks like Tesla (TSLA),Shopify (SHOP) and Spotify (SPOT). These riskier assets witnessed spectacular growth from late 2020 all the way through to November 2021,when the US Federal Reserve began hiking interest rates to combat inflation. This move saw money flee from speculative markets.
Gilbert explains that even though there’s goodevidence to prove that the correlation between crypto and stocks is declining,he expects the US equities market to lead crypto into a price slump in the coming weeks.