What is the Investment Outlook for BTC and Cryptocurrencies?
(Please note that our senior digital analyst David Grider, who writes our weekly crypto column, is sitting in for Tom Lee in this particular note. This is part two of a three-part series. Tom will return to writing Tom’s Take shortly) Part 1 is available here. Part 3 is available here.
How should investors frame crypto’s drivers and was the recent move a justified fundamental deterioration or an opportunity?
1. Emerging Market Play
Crypto market growth resembles that of an emerging market economy that’s recently opened to the outside world seeing new capital inflows and growth.
Remember, that like all emerging markets, it is influenced by macro external forces and shocks, and it is still early innings yet and idiosyncratic boom/bust drives may dominate.
2. Digital Gold Thesis
I don’t think that a month of trading action, bad as it has been, should outweigh 10 years of noncorrelation. Both gold and Bitcoin’s reaction to the turmoil has been mixed. Bitcoin’s correlation to gold has risen since the last sell-off now that the panic of the crisis has subsided, and it's now proving to be an uncorrelated hedge asset again. One more point, crypto has been a reliable store of value if bought cheaply.
3. Tech Disruption Trend
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