Why Crypto Needs Growth Stocks To Stabilize, Says Graticule CIO


An expert has argued that crypto trades like risky assets and looks like growth stocks, and as the traditional market is likely to continue to see high volatility in the coming months, institutional adoption of crypto is slowing until global equity markets find stability.

Crypto Institutional Adoption

The institutional adoption of digital assets is considered key to the future maturity and consolidation of the cryptocurrency market. The landscape of cryptocurrencies is likely to continue to change in response to the way global regulation, macro environment and mass adoption evolve in the coming years.

While many major companies have gradually started to approach digital currencies such as bitcoin, there may be a long way to go before institutional money enters the market en masse.

Recently, Bloomberg reported a note from JPMorgan strategists claiming that “the biggest challenge facing bitcoin going forward is volatility and the boom and bust cycles that hinder further institutional adoption.”

Likewise, Alex Kuptsikevich, a senior financial analyst at FxPro, explained told Forbes that Bitcoin’s price “is determined not so much by volatility as by public interest. Without investor interest, things quickly go sour, and with it it picks up just as quickly. In Bitcoin’s favor is the reduced growth of its supply and its finiteness.”

“We should also note that the arrival of institutional investors, the increasing adoption of bitcoin as an asset for portfolio diversification, and increased trading turnover in cryptocurrencies make the price less volatile over time.”

Related literature | Goldman Sachs: Mainstream Adoption Won’t Raise Bitcoin Price

Total Market Cap of Crypto at $1.8 Trillion in Daily Chart | Source: TradingView.com

Why Growth Stocks Can Drive Investors

In a Bloomberg television interview along with Adam Levinson, chief investment officer at Graticule Asset Management Asia, the expert noted that current volatility in growth stocks and traders’ fear of the Federal Reserve (FED) raising interest rates is slowing the pace at which institutions decide. to invest.

Levinson claims that many traditional institutions have already decided to allocate in crypto, but the current volatility has prevented them from investing.

“They don’t want their first foray into space quickly turning into a loss-making proposition.[…] Institutional allocations will wait for global equity markets, especially growth stocks, to stabilize.”

US inflation has risen significantly and so has the Vix ‘fear’ index, which measures stock market volatility expectations based on the S&P 500 index. High inflation rates are putting more pressure on the FED to hike rate hikes and many investors believe that traditional markets may be in a major sell-off.

Vix volatility index up 14.43% in the day to 27.35 | Source: Tradingview.com

Since bitcoin trades more like a stock, it directly affects the crypto market. Overall capitalization has recovered over the past week, but could see more volatility soon.

As Levinson noted, “What’s happened this year is you’re moving to an environment where the Fed is forced to raise interest rates just like other central banks. and you see a change in the extremely abundant liquidity environment.” As a result, “Crypto has suffered. Crypto is basically traded as a risk asset, which looks like a growth stock,” he added.

However, Lenson thinks there will be a situation “where crypto trades better than growth stocks” by mid-year, which could result in more institutional investors investing in crypto.

Related literature | Could crypto adoption be a compliance opportunity for banks?

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