Amid the decline in the price of bitcoin so far this year, the performance of the first cryptocurrency outperforms several traditional actions such as PayPal, Facebook or the Nasdaq index, analyst Will Clemente noted in a tweet on Wednesday. The analyst cites the cases of Shopify and Netflix among the worst performers in 2022, with drops of up to 60%, while the decrease in the return of bitcoin is 11.6% at the time of writing this article.
Both traditional stocks and the price of bitcoin have been affected by the geopolitical situation aggravated by the conflict in Russia and Ukraine. Likewise, due to the Federal Reserve rate increases that began in March and at least 5 more increases are expected in 2022.
Stocks included in the S&P 500 and Dow Jones indices have been less affected than bitcoin, down 7.16% and 3.76%, respectively. However, the technology shares of the Nasdaq index have fallen 15.56%, four points more than bitcoin.
As long as bitcoin, which this Thursday, April 21, fluctuates around USD 42,000, continues to rise, the outlook for the first cryptocurrency may improve compared to traditional actions.
Bitcoin is a better investment than firms that invest in bitcoin
In the bullish phase of bitcoin that reached its maximum in November 2021, the companies that had invested in bitcoin led by MicroStrategy and firms linked to bitcoin mining were also favored in the stock market, as the price of their respective shares experienced growth. at par with the price of BTC. With the correction of the price of BTC, the companies associated with bitcoin have experienced greater setbacks in percentages than that of the price of bitcoin.
According to the Wall Street Journal, companies associated with bitcoin have lost up to 60% this year. When the loss of bitcoin is 11% in the same period, Coinbase has fallen 42%, while Riot Blockchain has fallen 34% in the same time. The market capitalization of public companies investing in bitcoin, which was $100 billion, has fallen to $40 billion.
MicroStrategy, for example, started the trend of investing in bitcoin as part of its strategic reserve in August 2020, and continues to invest in that cryptocurrency. Since the beginning of the year, MicroStrategy has fallen almost twice as much as bitcoin, 21.18%. In a similar situation, although with a more pronounced fall, is Block (formerly known as Square), a company founded by Jack Dorsey, which reflects a loss of 33.41% so far this year.
Bitcoin Leading the ROI Race
Bitcoin is down 38.57% from its all-time high price of $69K made in November 2021, however, the top cryptocurrency seemed to steal the show, still. Data highlighted that BTC significantly outperformed Meta by 46.74%.
In comparison to the American multinational technology corporation, Microsoft Bitcoin’s ROI was 1.95% higher. Additionally, the king crypto’s ROI almost matched Apple’s surpassing the stock by 0.76%.
But that isn’t all, another factor that seemed to worry Bitcoiners was the top coin’s rising correlation with the two major indices—the S&P 500 and Nasdaq. Historically, Bitcoin has had a relatively low correlation to traditional asset classes, however, since last year, the same has been on the rise.
Rising Correlation, Diminishing Returns
Bitcoin’s trajectory after the September-November recovery last year made the top cryptocurrency one of the leading investment products with returns of about 60%.
While BTC’s ROI over the longer time frame has been higher than tech stocks, the two investment products have moved in tandem over the last year.
It can be argued that the higher correlation points to the impact of interest rates and inflation concerns that have affected both the stocks and the crypto market. That said, the maturing Bitcoin market and BTC’s developing narrative as an asset class could have also propelled the higher correlation.
Despite the relatively higher ROI, BTC’s ROI vas USD over the last year has diminished. Furthermore, higher volatility and increased correlation with traditional assets could play a spoilsport for the top coin.
Notably, over the last couple of months, volatility has affected both Bitcoin and traditional assets equally, amid worries of a potential interest hike and tapering measures by the Federal Reserve.
At press time, Bitcoin traded at $42,047.10 noting 0.87% price losses in 24-hours while the coin was down 1.31% by the week.