Over the last couple of weeks, when the authorities announced increasing interest rates to combat growing inflation, there has been intense selling pressure in the equities and crypto markets.
However, the crypto market is showing gradual recovery amidst the collapse of Terra’s stablecoin (UST). The leading digital asset (BTC) has recovered from a 16-month low, and as is the usual case, the other digital assets will soon follow suit.
Stock equities are also enjoying a rally, even though it is difficult to predict when the rally will last. Like other stock equities, crypto-related stocks were also making some recovery, as evident in the morning trading session on Monday.
The Top-Performing Crypto-Related Stocks
Microstrategy led other crypto-related stocks on the gainer’s chart. The crypto asset management firm gained 19.52% at the close of Friday’s session. However, the stock is still 71% off its YTD as investors remain concerned over the vast amount of its BTC holdings.
One of William Blair’s top analysts, Kamil Mielczarek, opined that “Microstrategy has the right fundamentals and enough liquidity to repay its debts, including any accruing interests.”
Microstrategy SMA 20-50-200 chart lines. Source: finviz.com
Leading America-based crypto exchange, Coinbase, occupied the second spot behind Microstrategy. Coinbase gained 16.02% as of the last trading session last Friday. Asides from the recovery by the broader crypto market, Coinbase’s rally may also be attributed to the enormous investment by the Walton family into the company.
Some industry analysts were surprised at Coinbase’s rally since the company’s latest earnings report (which was released last Tuesday) was poor. The information also caused a 35% drop in Coinbase’s stock value.
Coinbase sma 20-50-200 chart lines. Source: finviz.com
Crypto miner stocks also made some decent gains, with Hut 8 mining, Riot blockchain and Marathon Digital holdings making gains of 12.31%, 9.04% and 12.23%, respectively. No one can predict whether the rally is temporary or will continue over the long term.
It is difficult to predict whether investors should expect more volatility as intense selling pressure continues in the digital asset space. Russia and Ukraine are still at war, the federal reserve maintains its stance on increasing rates, energy prices are still rising, and inflation rates aren’t showing any sign of dropping soon.
While these indicators suggest that more volatility is imminent, the market sometimes doesn’t conform to the signals from these indicators. Hence, investors shouldn’t be surprised if the market goes against what is evident from the indicators.
Implications Of Tether’s Rapid Growth On The Traditional Market
Last year rating agency (Fitch) predicted that tether’s rapid growth could adversely affect the short-term credit market, where it holds its largest fund reserves based on the firm’s reserves breakdown disclosure report.
Fitch claims that if traders should dump huge volumes of USDT, the short-term credit market is likely to be destabilized. High-interest rates are already hurting the credit market. Hence, the intense selling pressure of USDT would only worsen an already bad situation. According to the disclosure report, tether holds $24B worth of commercial paper, $35B in treasury notes and $4B in corporate bonds.