Crypto stocks rally despite Bitcoin weakness. As Bitcoin and its rivals fell in value, several cryptocurrency-related stocks. And exchange-traded funds rose in value to kick off the new year.
On Monday, the cryptocurrency industry, which includes Bitcoin miners, exchanges. And blockchain-related enterprises, saw an overall increase in value. 1.7 percent was obtained by Marathon Digital Holdings (ticker: MARA). Which is one of the largest miners. ProShares Bitcoin Strategy ETF (BITO). While invests in Bitcoin through futures contracts, saw a 1.4 percent gain. Whereas the Amplify Transformational Data Sharing ETF (BLOK) gained one percentage point.
Some of the gains may be due to increased demand for technology stocks in general. By early afternoon, the Nasdaq Composite had gained one percent. Outpacing the S&P 500 by one point.
Bitcoin and other cryptocurrencies, on the other hand, were absent from the rally. Bitcoin was down one percent to roughly $46,500 at the time of writing. Ether, the second-largest cryptocurrency by market capitalization. Dell 1 percent to $3,750. Several major “alt-coins” were also having a bad day. With Solana down 2.7 percent to $170 and Cardano down 1.8 percent to $1.0033 each.
Investors’ perceptions of cryptocurrency tokens and stocks may be changing. Whether they are seen as proxies for so-called risk assets. Or as inflation fighters that will maintain their value. Even as interest rates and bond yields rise. This ciould determine the direction of the market in the coming months.
As a proxy for technology, the crypto stocks sector may be exposed to rising interest rates. And higher bond yields, both of which tend to put downward pressure on risky assets. As interest rates rise, the theory goes, technology stocks. As well as other high-growth assets will become less attractive.
Blockchain-related businesses and tokens are included
The blockchain industry and cryptocurrency tokens fit into this category to some extent. And they have come under attack on a number of occasions as bond yields. Have skyrocketed in recent years. Bitcoin has been on a downward spiral for several months. There hasn’t been much evidence of it breaking out of a rather narrow trading range. Since it started the year around $48,000. Down 30 percent from its record levels near $69,000.
Although it is not always apparent if Bitcoin is inversely or positively correlated to Treasury bonds. It is generally considered to be so. On Monday, the relationship inverted. The yield on the 10-year Treasury note increased by 11.5 basis points. Or hundredths of a percent, to 1.63 percent, while Bitcoin fell.
According to a research published Monday by Fundstrat Global Advisors. While the token has exhibited some “modest stabilization” over the last few days. Its true test will be maintaining support at $45,655. Which has tested in the past. According to Fundstrat, if Bitcoin goes below $49,000, it would likely fall back to the lows of last September. That were about $39,500. A move above $49,000 will required. For a “bigger bounce” to take hold.
The counterargument to crypto as a technology proxy is that Bitcoin might prove its mettle. As a store of value in an inflationary environment. While other cryptos benefit from a range of catalysts. As demonstrated by the example also of Ethereum and crypto stocks.
According to the January perspective from Digital Asset Investment Management. A registered investment advisor for cryptocurrencies, “there is no need to overthink things.” “We do not believe that a cryptocurrency portfolio. It can overly dominated by Bitcoin and/or Ethereum.”