Analyst: Cryptos to outperform most assets despite UST shock

By Raffaele Redi

Bloomberg’s McGlone links $1trn drop in crypto assets to $20trn decline in world equities

While the cryptocurrency market is still coming to terms with the repercussions of last week’s dramatic collapse in TerraUSD (UST), Bloomberg’s Mike McGlone believes cryptos will still perform better than other assets this year.

“Cryptos are poised to continue outperforming most assets,” tweeted McGlone, a senior commodity strategist at Bloomberg. “A top reason that the total market cap of crypto assets listed on Coindance has dropped about $1trn in 2022 is linked to world equities declining by around $20trn.”

Will BTC follow in footsteps of Amazon?

In addition, McGlone said the declining volatility of bitcoin suggests it may follow in the footsteps of Amazon. “The downward path of volatility in bitcoin may follow a similar trajectory as Amazon. The crypto’s 260-day volatility to 13 May is – at about 70% – nearly the same as Amazon’s stock was in 2009,” he said.

At the height of UST’s depegging troubles last week, McGlone observed that “the bear market in risk assets – notably the most speculative, cryptos – is shaking out excesses, including algorithmic coins”. His remark came a day after Tether (USDT) slipped below its dollar parity and fell to an intraday low of $0.9485 on Thursday, according to CoinMarketCap.

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BTC MVRV ratio at lowest level since April 2020

While bitcoin could follow Amazon’s path in the long term, BTC’s market value to realised value (MVRV) ratio was 1.28 as of 17 May 2022 – the lowest level since April 2020, according to Blockchain.com data. This means both short-term and long-term investors are trading with a slight profit margin. A negative MVRV value would mean traders are operating at a loss.

“It remains to be seen if a full return to the realised price is required to put this bear market to rest, and if so whether it is for months, weeks, days or just a short a moment,” said blockchain data and intelligence provider Glassnode in a report

In its assessment of the depegging of UST – and Thursday’s price drop in USDT – Glassnode noted: “This event will also no doubt attract the regulatory spotlight at a greater pace and urgency.” 

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