IDX Digital Assets CIO Ben McMillan argued on Wednesday that bitcoin’s “low correlation thesis” to risky assets “is gone.”
Speaking on “Mornings with Maria” on Wednesday, the crypto expert went on to argue that exactly wehn you would hope bitcoin would save your portfolio, it’s actually injecting risk given the cryptocurrency has traded with a high correlation during down markets.
“Do I expect it to stay this highly correlated to the risk assets indefinitely? No, but I think the positive correlation is here to stay,” he continued.
McMillan provided the insight amid falling cryptocurrency prices along with the recent huge plunge in the major stock indexes.
On Wednesday morning, bitcoin’s price stabilized at around the $31,000 level, down from its all-time high of over $68,000 reached in November 2021.
The cryptocurrency traded down for six straight days heading into Wednesday.
Bitcoin is down more than 22% over that time. For the month, bitcoin is off more than 19% and down more than 33% year-to-date.
|COIN||COINBASE GLOBAL INC.||56.67||-16.32||-22.36%|
|BITQ||EXCHANGE TRADED CONCEPTS TRUST BITWISE CRYPTO INNOVATORS E||9.05||-0.17||-1.84%|
Other cryptocurrencies are showing signs of stabilizing as well.
Bitcoin and other cryptocurrencies have had some rough weeks in anticipation of and following the half-point interest rate hike by the Federal Reserve. It was the second of several anticipated increases this year as the central bank seeks to combat soaring inflation, which is at a high not seen in four decades.
This past year, tighter monetary policy has impacted both stocks and cryptocurrencies.
|I:DJI||DOW JONES AVERAGES||32055.79||-104.95||-0.33%|
|I:COMP||NASDAQ COMPOSITE INDEX||11604.263677||-133.41||-1.14%|
The tech-heavy NASDAQ fell 1.5% last week, and has lost about 28% year to date, hurt by the potential of persistent inflation, which is forcing the Fed to raise rates despite slowing growth.
“It’s been a wild ride,” McMillan said, noting that following last week’s Fed meeting “risk assets sold off right after that.”
McMillan went on to say that he is telling clients to think of investing in crypto “not as hedge” and “not as a low correlation diversifier,” but as a technology play.
He added that “its utility going forward is going to look and feel a lot more like speculative technology stocks and so I think that’s how investors need to think about it, in the context of volatility, positive correlation, etc.”
FOX Business’ Ken Martin contributed to this report.