Bitcoin is likely to have a worse performance than other assets in the coming months because it has no fundamental worth, Capital Economics said.
London-based Capital Economics, an investment research firm, explained that the cryptocurrency has been quite closely correlated to the S&P 500 since the price started to fall from its record high at the end of last year, but this correlation has been coincidental and related to specific factors.
The recent fall of Bitcoin has been due to a plethora of factors including: rising concern over regulation, a ban on cryptocurrency advertising from major internet platforms and some banks banning customers from buying it via credit cards.
“In other words, the factors driving bitcoin prices are still rather different to those driving the prices of other assets,” Capital Economics said. “Bitcoin’s correlation with equity prices has strengthened recently, but we think that this will be just temporary. We still think that bitcoin is essentially worthless, meaning that it is likely to fare much worse than other assets in the coming months“.
“We expect equity markets to fall as investors cotton on to the fact that rising U.S. interest rates will slow economic growth. But the main factor driving down the price of bitcoin is likely to be a realization that it is simply not a credible long-run alternative to conventional currencies,” the note ended.
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