The cryptocurrency market has underperformed in recent months, and another downturn may be on the horizon.
Arthur Hayes, the former CEO of crypto exchange BitMEX, warned that the cryptocurrency market could suffer another decline in the second quarter of 2022.
He set out his views in a blog post, arguing that the weakened state of global equity markets could trigger a crypto crash.
“The uncomfortable truth haunting crypto right now is that crypto is moving in lockstep with debt-based, unfree risk-asset markets such as the equities of developed nations. This remains the case despite the efforts of devoted proponents of ‘Lord Satoshi’ who fight to create a counter-narrative grounded in technological truth.”
Hayes contends that crypto is tracking U.S. tech stocks and warned that Russia’s invasion of Ukraine will weigh on both. While he remains long-term bullish on cryptocurrency values, he is pessimistic about short-term performance.
According to the former investment banker, if the NASDAQ 100 falls, the crypto market will likely fall with it. To support this view, he presented charts illustrating the correlation between traditional markets and cryptocurrencies.
Hayes expects the NASDAQ 100 to decline if the conflict in Ukraine drags on.
“Global growth will slow due to higher commodity prices driven by the continuation and possible escalation of the war between Russia and Ukraine, which will hurt equity prices.”
The cryptocurrency market has lagged in recent months. Since Bitcoin reached an all-time high of $69,044 in November 2021, it has lost more than 40% of its value.
Total cryptocurrency market capitalization peaked at $3 trillion in November but has since fallen to around $1.8 trillion. Both Bitcoin and the broader crypto market have underperformed lately, and the downtrend could persist for some time.