As other asset markets, particularly the stock markets, enter a bear market some believe cryptocurrencies have a chance at being the best performing asset class next year.
Travis Kling, a self-proclaimed ex-equities portfolio manager who “fell down the crypto rabbit hole” and is now heading up the cryptocurrency asset management firm Ikigai, tweeted today:
Crypto has never existed during a bear market in traditional assets.
BTC was birthed at the very beginning of the largest monetary experiment ever- globally coordinated QE. Ending QE is causing pain
There is a significant chance Crypto is the best performing asset class in 2019 pic.twitter.com/vIdKTrm5sV
— Travis Kling (@Travis_Kling) December 23, 2018
The U.S Federal Reserve began quantitative easing (QE) ten years ago, lowering interest rates and buying trillions of dollars’ worth of government bonds and mortgage-backed securities. The move potentially saved the U.S from major depression. Other global economies followed suit in buying bonds and increasing market liquidity in order to fuel economic growth.
Could Quantitative Tightening Inspire Investors to Choose Digital and Decentralized?In late 2017, the Federal Reserve began to let its holdings mature without reinvesting. The U.S was the first to end quantitative easing moving instead to the opposite – quantitative tightening. The Bank of Japan (BOJ) and the European Central Bank (ECB) also slowed bond purchases in 2018.
Central Bank Assets Source: Bloomberg
Bloomberg Economics declared October 2018 as the month the world’s largest central banks collectively started to decline their bond holdings. Though the ECB and BOJ are still scaling back rather than releasing holdings.
With the U.S leading, interest rate rises are a further sign of “normalization” a process of allowing economies to operate under their own steam without central bank intervention. It’s this, combined with other factors, that’s causing fear of global recession and impacting global asset markets.
Cryptocurrencies emerged in 2009, just after QE began and, Kling is right, have not existed in a traditional asset bear market. Kling also agreed that this year’s developing bear market has impacted cryptocurrency performance and as a risky asset they could also see further impact:
“It would make complete sense to me that crypto would bottom out months before traditional asset classes.”
After Kling’s tweet, the resulting conversation on Twitter held mixed opinions. Some believe cryptocurrencies could continue to fall and be the “worst” performing asset class out of a global economy of bad-performers. Others think that once again believers in this new digital asset class, out of the control of central government manipulation, will lead the charge and spur a reversal of the cryptocurrency market.
Cryptocurrency Market Capitalization Source: CoinMarketCap
This reversal may already be happening, over $30 billion has re-entered the cryptocurrency market in the past week as other asset markets plummet. Outperforming all other assets in 2019 would forever cement the role of cryptocurrencies in global economies. Time will indeed tell.
Reference:
https://www.ccn.com/cryptocurrencies-could-outperform-all-other-assets-in-2019/