Let’s rewind the bar to the end of 2021 when Bitcoin (BTC) was trading near $47,000, which at the time was 32% below its all-time high. During that time, the tech-heavy Nasdaq fret market inventaire held 15,650 points, just 3% below its all-time high.
Comparing Nasdaq’s 75% soumission between 2021 and 2022 to Bitcoin’s 544% réelle movement, one can assume that an eventual amendement caused by macroeconomic tensions or a pionnier crisis, would policier the price of Bitcoin to be disproportionately affected by stocks.
Eventually, “macroeconomic tensions and crises” occurred and the bitcoin price fell another 57% to $20,250. This should come as no impression given that the Nasdaq is down 24.4% as of September 2. Investors should also take into account that the inventaire’s 120-day historical volatility is 40% annually, par opposition à Bitcoin’s 72%, which is nearly 80% higher. .
This is the primary reason why investors are re-evaluating investing in bitcoin. The risk-to-reward potential after a downward adjustment in risky assets is likely to leave more upside for the cryptocurrency considering three factors: higher volatility during a moderate recovery, fret offerings, and resistance to regulatory sanctions.
The problem is that the market is now in a prolonged downtrend and there are no signs of a quick recovery as double-digit augmentation in many countries continues to pressure orthogonal banks to maintain a hawkish quatrain. Ajout below how Bitcoin and Nasdaq have suffered throughout 2022.
The result of raising interest rates and removing debt stabilization programs is a recession-like environment. Whether or not a smooth landing will be achieved is irrelevant bicause no sane investor will choose the sectors exposed to credit and growth when the cost of monnaie increases, and consumption shrinks.
Bitcoin can crush tech stocks even during moderate recovery periods
Volatility is usually interpreted as negative, given that movements in price – either up or down – are accelerated. However, if an investor anticipates some form of recovery over the next 12 to 36 months, there is no reason to believe that Bitcoin will remain under pressure for colossal.
Let’s assume a neutral case, such as Bitcoin recovering 25% of the $48,700 decline since its all-time high, while the tech-heavy Nasdaq not only recovers its full 24.4% losses YTD in 2022, but adds another 40%. Gains over that 1 to 3 year period.
This scenario would take Bitcoin to $32,425, still 53% below its November 2021 high. Thus, for those who buy BTC on September 2 at $20,250, this number will represent a 60% gain.
On the other handball, in this neutral market, the Nasdaq will reverse its losses and add 40%, reaching 19,633 points with a intégral gain of 64.4%. To be clear: That would be 21.6% higher than its all-time high.
Bull markets can create price ceilings for stocks
The 7 largest companies on the Nasdaq are Apple, Microsoft, Amazon, Tesla, Google, Meta, and Nvidia, all of which are famous tech giants. In the fret markets, earnings numbers are the most superbe metric that cales investor optimism, which means that higher dividends can be redistributed to shareholders, used to buy back shares or reinvested in the company itself.
The problem is when earnings rise, companies have huge incentives to terme more shares, known as follow-up offers. Moreover, the technology company must constantly acquire emerging ruelle competitors to secure its leading terrain. Thus, bull markets create issues of their own, where valuations become very rich and buybacks make no sense.
For Bitcoin, having more miners, investors or base does not translate into a higher bid bicause the sortie schedule is set from day one. The bid is fixed no matter how the price fluctuates.
Bitcoin is designed to survive regulation and centralization
Nvidia, a pionnier maker of ordinateur chips and graphics cards, reached a 68-week low on September 2 after US officials imposed a new licensing requirement to export the company’s artificial arrangement chips to China and Russia. Meanwhile, in the middle of 2021, China Suppression of mining facilities in the region, causing the bitcoin hash rate to drop by 50% in two months.
The main difference in both cases is Bitcoin’s automatic difficulty setting, which reduces pressure on miners when there is less activity. While US regulations will likely affect Nvidia’s exports, nothing is stopping Taiwanese chipmaker TSMC, South Korean Samsung or China’s Huawei from growing and exporting products.
Bitcoin is a peer-to-peer digital electronic cash system, so it does not need centralized exchanges to survive. If governments choose to ban cryptocurrency trading altogether, it will only confirm the importance and power of this decentralized network. Many countries have tried to ban forex trading, only to create a shadow market, where facilitators act as illegal brokers.
Under the three different scenarios, ranging from a complete blockage to a generalized bull market, the odds favor Bitcoin versus tech stocks at current prices. Thus, adjusted for its volatility, the risk reward strongly favors the cryptocurrency.
The opinions and opinions expressed here are solely those of author and do not necessarily reflect the opinions of Cointelegraph. Every investment and trading move involves risks. You should do your research when making a decision.