The cryptocurrency market has underperformed in recent months, and we may soon see further declines.
Arthur Hayes, the former CEO of the crypto exchange BitMEX, believes the cryptocurrency market will face additional downturns in the second quarter of 2022.
He expressed this view in a blog post on Monday. According to Hayes, the weak condition of global equity markets could trigger a crypto crash. He wrote:
“The uncomfortable truth haunting crypto right now is that digital currencies are moving in step with risk-asset markets built on debt and with supposedly risk-free markets, such as developed global equities. This is happening despite the efforts of loyal petitioners to Lord Satoshi, who strive to create a counter narrative based on technological truth.”
Hayes argues that digital currencies are tracking US tech stocks and that the Russian invasion of Ukraine will weigh on both. While he remains optimistic about cryptocurrency prices over the long term, he is not hopeful about short-term performance.
According to the former investment banker, if the NASDAQ 100 falls, the crypto market will fall with it. He supported his view with several charts demonstrating the correlation between traditional markets and crypto.
Hayes predicts the NASDAQ 100 will decline as the Russia-Ukraine conflict continues to drag on. He stated:
“Global growth will slow because of higher commodity prices driven by the continuation and possible escalation of the Russia/Ukraine war, which will hit equity prices.”
The cryptocurrency market has posted weak returns in recent months. Since reaching an all-time high of $69,044 in November 2021, Bitcoin has lost more than 40% of its value.
Total crypto market capitalization peaked at about $3 trillion in November but now stands near $1.8 trillion. Bitcoin and the broader crypto market have struggled recently, and the downtrend could persist for some time.