• Mark Mobius criticizes El Salvador’s Bitcoin strategy
• Correlation between cryptocurrencies and stock market
• The low point is yet to come
Worldwide money transfer also possible without Bitcoin
The market expert Mark Mobius is not exactly known for giving much to the market for cryptocurrencies such as Bitcoin, Ether & Co. He judged El Salvador’s decision to make the crypto veteran legal tender as unhelpful for the heavily indebted country. The portfolio manager told Bloomberg TV last year that Bitcoin was impractical and risky. Instead, money transfer systems like Kenya’s Safaricom Plc, in which Mobius has a stake, would be more suitable. “You don’t need Bitcoins,” explained the economist. “You can also transfer money without him if you don’t have a bank account. In my opinion, the whole system will develop globally towards that.”
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Crypto crash pulls Bitcoin & Co. deep into the red
Mobius does not appear to be entirely wrong in his criticism of the high risk of digital assets: Cryptocurrencies have recently been under significant pressure in the context of rising interest rates and restrictions in the supply chain in China and Europe. Bitcoin, the largest cybercurrency weighted by market capitalization, climbed to an all-time high of around $68,789.63 in November 2021, but fell to $17,708.62 during the recent crypto crash. Most recently, a bitcoin on the CoinMarketCap platform still costs 20,654.44 US dollars (as of July 14, 2022).
Bitcoin acts as a leading indicator for the stock market
However, the cyber motto is not entirely without use, as Mobius has now revealed. In an interview with Bloomberg, the price development of digital coins can also be of interest to investors who are not invested in the crypto market at all, but focus on trading stocks. “Cryptocurrencies are a measure of investor sentiment,” the analyst told the news agency, referring to the positive correlation between Bitcoin and global stocks. “If bitcoin goes down, the next day the Dow Jones goes down too. That’s the pattern you get. It shows that bitcoin is a leading indicator.” For example, the recent price decline in bitcoin has also resulted in a bear market in the MSCI World Index.
In a post on the short message service Twitter, the emerging market investor confirmed his thesis again shortly afterwards. “Many people started investing in #bitcoin believing it was an alternative to stocks, but the cryptocurrency has become increasingly correlated with the stock market,” Mobius tweeted. “So much so that I believe it’s now a strong indicator of stock movements.”
Many people started dipping their toes into #Bitcoin believing it was an alternative to stocks, but the cryptocurrency is becoming more and more correlated to the stock market. So much so that I believe it is now a powerful indicator of stock movements. https://t.co/miq6UjQwg6
– Mark Mobius (@MarkMobiusReal) June 29, 2022
Hope in the crypto market stands in the way of a bottom
Investors in Bitcoin & Co. are still hopeful at the moment, Mobius continues. Crypto fans are “still talking about buying on dips” in hopes of a recovery rally. “This also means that we have not yet reached the bottom of a bear market,” fears the market expert. The actual low point is only reached when both institutional investors and small investors “throw in the towel” and no longer pump up the market with money due to heavy losses. “This is the time to buy stocks,” Mobius advised Bloomberg.
Until then, however, investors should exercise caution. Instead, the investor holds “some cash” until the time comes for future investments. But then it could be worth investing in Indian stocks in the areas of building materials, software and medical tests.
Editorial office finanzen.net
Image Sources: Bad Man Production / Shutterstock.com, Franklin Templeton Investments