In a recent call with investors, executives from the crypto hedge fund Pantera Capital said they believe DeFi assets such as Ethereum could soon break out of their current correlation to traditional macro markets. The market has seen increasing similarities between these two spaces recently. But there’s no guarantee it will continue or even last for very long at all, given how quickly things change in this industry.
Pantera Capital believes the crypto market will be able to “decouple” traditional macro assets even when interest rates go up.
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In the interview on February 1, CEO Dan Morehead and co-chief investment officer Joey Krug both said they believe this transition is happening now. Institutional investors are entering the space, leading them away from stocks or bonds into cryptocurrencies like Bitcoin and other related technologies like the blockchain 2030 panel discussion.
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Pantera Capital Management shared the details from their recent call with investing public on Wednesday this week in a new Blockchain Letter.
Crypto is starting to break from its traditional correlation with macro assets. According to Krug, history has shown that when the former goes down for 70 days before decoupling and trade on its own again over weeks – as we expect soon enough!– crypto’s becoming more resilient by leaps and bounds.
It doesn’t guarantee that it won’t go down a lot more next month or whenever, but it just means the odds are high that the markets are at an extreme and will bounce back relatively quickly.
Pantera Capital Predictions Proved In the Past
Since February 2021, when BTC traded at around USD 47 thousand after correcting 20% in a week, Krug predicted that “a bitcoin rally might be back by April if not sooner.” The price then increased to over $63,000 before starting intense downturns, bringing its sizes below $30,000.
Krug said that he does not think the prices for many digital assets are too high right now, with some DeFi tokens trading at P/E multiples ranging from 10-40. They have moderate value; tech stocks go up to 500x turnover rates.
This time around, he further explained why investors shouldn’t worry about over-investing in cryptocurrency or finance. Despite recent crashes caused by several governments imposing restrictions on bank transactions involving Bitcoin (BTC).
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P/E (price-to-earnings) ratio is a standard tool used to value stocks and can be found by dividing the market value per share (or token) of an individual company’s portfolio by its annual earnings.
It’s my personal view that USD 2,200 ETH was likely the bottom.
Pantera CEO says you need to consider the cash flow when discounting an asset’s value, which means lower prices if yield rates are higher.
Crypto is not just a thing of value; it’s also an investment. Just as with gold, many factors determine its price and worth. Volatility is one such factor, supply vs. demand within different markets worldwide. As a result, the element can impact how much people want to buy or sell at any given moment in time.
The Pantera CEO said;
It can behave in a very different way from interest-rate-oriented products. I think when all’s said and done, investors will be given a choice. They have to invest in something, and if rates are rising, blockchain is going to be the most relatively attractive.
With tensions rising throughout Europe and Asia, it is expected that inflation will be at an all-time high in 2022. This could give bitcoin (BTC) a valuable hedge against volatility. In addition, provide stability for other digital assets like ethereum or Litecoin during their respective peaks next year.
Bitcoin “remains hesitant,” according to an analyst at GlobalBlock. The bitcoin price has been trading lower recently and did not participate in the futures’ recent rally. However, they are still selling off more than usual compared with spot prices which have dipped even further down over this last week or so.
Marcus Sotiriou, a GlobalBlock analyst, added;
This suggests that this price rise was driven by speculation or hedging rather than genuine demand.