Bitcoin and Ethereum prices might increase again says Bloomberg Analyst
Analysts from Bloomberg say that the Bitcoin and Ethereum prices might rally to outperform Nasdaq 100. One big reason which was pointed out was the Russian-Ukrainian war and the subsequent sanctions. The sanctions created a lack of convertible foreign exchange in Russia which led to demand for cryptocurrencies in the country. Another reason is in technical details.
Brief of The Report
Analysts Mike McGlone and Jamie Douglas Coutts from Bloomberg claimed that Bitcoin might outperform the Nasdaq 100 Index. They gave strong reasons that they gave to support their view.
- The ongoing Russia-Ukraine conflict.
- Bloomberg’s Galaxy Crypto Index.’
Let us see both of them in detail:
Russia-Ukraine Conflict
On Feb 24 Russia began what it called a military operation in Ukraine. This eventually led to a series of sanctions by the USA, European Union, the UK, and Japan among others. These sanctions led to the rise in crude oil prices, a key export of Russia. Unable to get US Dollars for its crude oil, Russia might turn to cryptocurrencies to get paid(at least a portion of payments). This further pushes the demand for cryptocurrencies higher.
Bloomberg’s Galaxy Crypto Index.
The Bloomberg Galaxy Crypto Index is a large cryptocurrency index that tracks some of the largest cryptocurrencies traded in exchange for the US Dollar. A few names including Bitcoin, Ethereum, ADA, Tether, etc., are on the index.
This index saw a growth of 800% from the end of 2019 till April 4, 2022. Compare this with the total gains in the Nasdaq 100 fund over the same period which is at 70%. Now over performance or over-decline typically comes from high volatility. Data shows that the BCGI has declined twice with over more than 50% since Nov 2021 heights. Now the volatility is almost twice that of the Nasdaq 100. Compare this to its average volatility since 2017, i.e., 4.4x that of Nasdaq. This divergence clearly signifies a much more stable market than that was in the past.
Reason for Expected Rally in Bitcoin and Ethereum
If any such rally arises, Bitcoin and Ethereum are the two cryptocurrencies that tend to gain the most. Because:
- Bitcoin is still the principal currency of cryptocurrency markets and is truly decentralized, hence no bias of any central authority.
- Ethereum supports many projects, NFTs, decentralized applications, and even blockchains such as Polygon. It also acts as collateral in many liquidity pools, games, validator nodes, blockchain oracles, etc.
A key indicator of strength in any stock or cryptocurrency is the 50-day moving average. If you take a closer look at the charts, Bitcoin is almost about to cross its 50-day moving average, signaling a medium-term Trend Reversal.
What is holding the rally back?
A reason that might be stopping cryptocurrency prices from rising is the Federal Reserve’s monetary policy. The US is a key market in the cryptocurrency world, the past rally to $70k approx was fuelled by an expansionary monetary policy which is not the case now. Now, on the other hand, there is a hawkish policy that might make fewer people purchase cryptocurrencies. Since Bitcoin and Ethereum signify the largest share, the effect on them might be the most felt in the market.
Our Analysis
Overall, the rise of cryptocurrency looks inevitable. Technical data is pointing towards growth too with almost halfway recovery from recent lows in cryptocurrency prices, especially in Bitcoin and Ethereum. Further, with the planned Eth2.0 upgrade, there might be a fundamental shift in prices in favor of these cryptocurrencies. Bitcoin’s domination in the market is perhaps the most important reason behind it being synonymous with the word cryptocurrency.