Crypto markets were in the red at the start of the week. However, Bitwise's CIO has three pieces of advice for investors.
Crypto investors could be forgiven for feeling fear, uncertainty and doubt — or FUD, abbreviated in industry parlance — after a massive selloff saw the crypto's total market capitalization drop 18% to $1.8 trillion on Monday.
However, Bitwise Chief Investment Officer Matt Haugan says traders' fears are misplaced and obscure a huge opportunity.
“Historically, whenever we've seen these types of global financial panics, crypto has traded higher early, but ended higher in the following year,” Haugan wrote. In a research note.
Crypto and stock markets recovered somewhat from Tuesday's bloodbath, falling below $50,000 on Monday for the first time since February.
Here are three reasons Haugan sees hope in FUD.
Fed rate cut
White-knuckle crypto pundits responded to the weekend wipeout by pleading with the Federal Reserve to cut interest rates and add some liquidity to the market.
Risky assets such as cryptocurrencies generally do well when liquidity enters the market.
“So the money printer is coming? If history is any guide, yes,” said Haugan. “It happened during Covid. This happened after the Eurozone crisis in 2010. That happened in 2008. If the events of this weekend lead to real financial unrest, it will happen again.
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The central bank raised its odds of a market rate cut to 98% from 11% by its September meeting, Haugen added.
Time to buy
Haugan said this weekend's events are reminiscent of March 2020, when bitcoin plunged 37% to $4,971 in the wake of Covid-19-fueled panic.
However, with the Federal Reserve cutting interest rates and reining in liquidity, Bitcoin has started to rise.
A year later it is up 1,000%, trading at $57,332.
“In retrospect, March 12, 2020 is not a time to panic. This is the best buying opportunity for Bitcoin in a decade,” Haugan said.
He said the Covid scare showed central banks stepping in when the economy was at risk and supercharged the reasons why bitcoin had good long-term value.
“I see the same setup today,” Haugan said.
Ignore the short term
Ultimately, trying to time the market is a fool's errand, Haugan says.
He argues that Bitcoin is more than an investment in a financial revolution and an extremely volatile tradable asset.
“Resist the urge to look at intraday prices and focus on where bitcoin will be next year, five years, and 10 years from now,” Haugan said.
Crypto market movers
Bitcoin has gained 7.3% to $55,094 in the last 24 hours. Ethereum is trading up 9% at $2,456.
What are we studying?
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