Wed, May 08, 2024 at 21:31

• 

  Kang-hoon

  • Hello Annie.

  • Today, I'd like to discuss the iShares Bitcoin Trust ETF (NASDAQ: IBIT) which fell by 17.1% last month, according to data from S&P Global Market Intelligence.

  • This ETF, launched earlier this year, has been a popular vehicle for people seeking Bitcoin exposure in their investment portfolio.

  • 
• Annie

  • Oh, that's quite a drop!😮 What caused it?

  
• 

  Kang-hoon

  • Well, macroeconomic conditions created a favorable environment for the cryptocurrency during the first quarter, but those reversed in April.

  • Bitcoin has become a more popular asset class with broader acceptance among investors.

  • However, this legitimacy comes with consequences, such as exposure to the prevailing forces in global capital markets.

• Annie

  • I see...

  • So it's not just about Bitcoin's own performance anymore.🤔

  
• ADward

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• 

  Kang-hoon

  • Exactly.

  • In recent years, the prices of Bitcoin and other high-profile crypto assets have been highly correlated to other speculative assets.

  • For much of the past five years, Bitcoin's price has behaved like that of a high-growth tech stock, except with even more volatility.

• Annie

  • Wow, so it's like investing in tech stocks but with higher risk?😲

  
• 

  Kang-hoon

  • In a way, yes.

  • Growth investors are apparently buying and selling this crypto asset as general risk tolerance rises and falls.

  • It's no longer a niche community for supporters of the tech, and it's not behaving like a precious metal.

• Annie

  • Hmm...

  • So what happened in April?

  
• 

  Kang-hoon

  • Bitcoin's relationship with growth stocks continued in April, and the iShares Bitcoin ETF tumbled along with it.

  • Interest rates might be the most important macroeconomic factor for the stock market right now.

  • The Federal Reserve hiked interest rates in 2022 in an effort to combat price inflation.

  • 
• Annie

  • So, higher interest rates are bad for Bitcoin?😕

  
• 

  Kang-hoon

  • Yes, high rates discourage borrowing, which in turn discourages consumer spending, corporate growth investments, and hiring.

  • Those conditions tend to curb investor risk tolerance because they introduce uncertainty.

  • Businesses face a potential recession and weak growth prospects, making them less appealing to potential buyers.

• Annie

  • Oh no, that sounds quite bad...😟 So, is this news a bad sign for Bitcoin?

  
• 

  Kang-hoon

  • In the short term, yes.

  • Bitcoin is subject to the downside potential associated with other popular risk assets, which was relevant last month.

  • However, long-term investors should anticipate more volatility moving forward.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.