Tech Tumbles & Crypto Dips: How Low Can Prices Go?

TL;DR

Tech stocks and Bitcoin are experiencing a sell-off amid concerns over rising interest rates and market dynamics. Real Vision's experts discuss the impact of the Federal Reserve tightening, the state of the crypto market, and potential spillover effects in other regions.

Transcript

hello and welcome to the real vision daily briefing it's monday january 10th 2022 i'm maggie lake here today with alfonso pacquiatiello the author of the macro compass and real visions westin nakamura this is shaping up to be a volatile week so we decided to pull in not one but two of our best thinkers to help us all make sense of what is going on ... Read More

Key Insights

• ☠️ The market is pricing in the likelihood of the Fed tightening monetary policy, with expectations of multiple rate hikes and even quantitative tightening.
• 🐢 The network growth of Bitcoin has slowed down significantly, while Ethereum and other protocols are outperforming due to burning tokens and increased network usage.
• ✳️ The situation in Turkey poses risks of social unrest and geopolitical tensions that could affect commodity and risk asset volatility globally.

Questions & Answers

Q: Why are tech stocks and Bitcoin experiencing a sell-off?

Tech stocks are being hit hard by rising interest rates, inflation concerns, and the fact that retail investors are sidelined. As for Bitcoin, its network growth has slowed down significantly, and Ethereum and other protocols are outperforming it due to burning tokens and increased network usage.

Q: How are investors reacting to the tightening measures by the Federal Reserve?

Investors are becoming more aware of the Fed's plans to tighten monetary policy, with many strategists predicting multiple rate hikes and even quantitative tightening. This is causing a reassessment of valuations, particularly in high beta assets that are sensitive to interest rate cycles.

Q: What is the potential impact of the situation in Turkey on the global markets?

The volatility in the Turkish Lira and the policy measures implemented by President Erdogan could create social unrest and geopolitical risks. This could spill over into commodity and risk asset volatility globally, especially in the context of tensions with Russia and Ukraine.

Q: Can the tech sector recover in a rising interest rate environment?

The recovery of the tech sector depends on various factors, including the trajectory of interest rate hikes, inflation, and market dynamics. While rising rates put pressure on high valuations, the long-term growth potential of the tech sector could still attract investors.

Summary & Key Takeaways

• Tech stocks and Bitcoin are plummeting as the yield on the 10-year rises and retail investors are sidelined due to inflation concerns.

• Real Vision founder, Raoul Pal, explains that the network growth of crypto has slowed down significantly, while Ethereum and other protocols outperform due to burning tokens and increased network usage.

• The market is waking up to the fact that the Fed is tightening, with Goldman Sachs predicting four rate hikes and the possibility of quantitative tightening, causing high beta assets to be hit the hardest.

• The situation in Turkey and its potential spillover into the Euro market, as well as the volatility in tech stocks and Taiwan's market, are factors to watch closely.