The crypto market is suffering from a bleak economic outlook. However, according to a recent survey from the Bank of America Corporation, the crypto market may have bottomed. The survey, which included various hedge fund managers, reveals that a strong equity rally can start in early 2023. Therefore, it can be the best time to invest in crypto again.
According to Bloomberg, the survey believes that the stock market has achieved “full capitulation”. Other strategists believe that the bottom can be reached in the early parts of 2023.
Bank of America’s chief US strategist believes that the survey strongly signals full macro capitulation, investor capitulation, and the start of policy capitulation.
Why The Crypto Market Is Struggling
The crypto market shows a strong correlation with the general stock market. Beta is the measure of how strongly an asset is showing correlation to the broader market. According to COINBASE Research, the crypto market has a beta of 2, which means it exhibits twice as much price movement as the broader market. Therefore, it shows a strong correlation with tech stocks and the tech-oriented NASDAQ 100.
Due to this correlation, the cryptocurrency market is experiencing a massive selloff. The Federal Reserve is engaging in offloading its ballooned-up balance sheet. Moreover, quantitative tightening and interest rate hikes have plummeted the stock market. The Fed has already increased interest rates by four consecutive 75 bps hikes. Recent CPI and PPI data have all but ascertained another mega hike.
However, experts are beginning to wonder if the Fed will have to pivot to protect global financial stability. Fears of recession, deflation and stagflation have risen considerably. The Bank of America survey also expects the Federal Reserve to pivot in early 2023.
The survey believes that market liquidity has deteriorated significantly and that the stock market is correctly signaling investor pessimism.
The Best Time To Invest In Crypto
The Bank of America believes that a strong equity rally will start in the first half of 2023. However, crypto and market expert Florian Grummes believes that the crypto winter can last for another year or year and a half.
