Memestocks And Crypto Are Twice As Volatile As The Overall Market
Last Updated on 12 January 2022 by CryptoTips.eu
The wisdom of Lou Mannheim refers to a character in the Oliver Stone movie Wall Street, the pallbearer of all finance films. Lou is an elderly trader who teaches the youngsters on his trading floor that in times of crisis, you should always ‘stick to the fundamentals,’ because ‘that’s how IBM and Hilton were built’.
This immediately also tells you the age of Lou of course. In a deleted draft of the script, Lou was also supposed to say to Charlie Sheen’s character at the end of the movie that when it rains, it pours. And this is a saying that could be very well applicable to the state of the crypto and the tech stock market right now.
In a newly released financial report, it was proven that the crypto and Nasdaq stock markets have now become heavily intertwined. With the Nasdaq in correction territory, that could spell trouble for Bitcoin, Ether and so many others.
Memestocks and crypto
Many people must be thinking about liquidating their positions as Bitcoin and altcoins are under intense selling pressure. Wall Street analysts believe they are likely to remain in this state for a while.
Jay Hatfield, CEO of Infrastructure Capital Advisors said:
Cryptocurrencies are likely to remain under pressure as the Fed reduces its liquidity injections. Bitcoin could end 2022 below $20,000.
Tighter Fed policy affects not only interest rates but the equity risk premium as the Fed withdraws funds from the capital markets. Riskier investments such as unprofitable tech, meme stocks and cryptocurrency are disproportionately affected relative to the rest of the market since those investments are approximately twice as volatile as the overall market so have double the risk premium as the average stock.
Nothing but negativity overall but remember to keep your calm before taking any rush decision, or as Lou Mannheim used to say: quick buck artists come and go with every bull market, but the steady players make it through the bear markets.