The cryptocurrency market has been trending sideways so far in 2022. The question on everyone’s mind is what is the outlook going forward?
The infamous Bitcoin price is down over 14% from the start of the year. This is primarily due to the high level of uncertainty in the macroeconomic sphere trickling through into the crypto space. A lot of higher risk tokens and the mysterious NFTs have been affected to a much higher degree. NFT transactions in particular have fallen over 78% in the last 3 months.
Most major cryptocurrencies have been following a similar trend to higher risk investments such as ASX Information Technology stocks. The All Tech Index (XTX) has fallen over 20% in the last 6 months as IT equities are seen as higher risk due to their high price to earnings metrics.
Now with interest rates rising and expected to rise further throughout the year, the opportunity cost of these investments is a lot lower.
These changing macroeconomic conditions are expected to cause a short-term consolidation in the major cryptocurrencies, but various market leaders are confident this will not have a dramatic effect on the long-term outlook for crypto investors.
eToro cryptocurrency analyst Josh Gilbert stated: “While rate hikes generally equate to a lower investor appetite for higher risk assets like crypto, it’s unlikely to change the long-term picture for the asset. It’s expected that we will continue to see a period of consolidation with crypto, as long as geopolitical tensions ensue. In the situation that they do ease, a crypto relief rally is anticipated to occur.”