Cryptocurrencies bottomed out at the end of the first half of this year, after which their recovery began with the assumption that medium-term growth is ahead. Cryptocurrency markets in the USA and Germany are the most developed, while the Adriatic region lags behind in crypto-investments. Of the countries in the region, in relation to the total population, citizens of Serbia and Slovenia own crypto the most.
Movement in the crypto market
Cryptocurrencies have shown significant volatility in 2022, going hand in hand with the negative attitude of global investors towards risk, Bloomberg Adria’s analytical team has determined.
According to their data, the crypto bottomed at the end of the first half of 2022, reversing some of its 2022 losses since then.
The Bloomberg Galaxy Crypto Index is down 54 percent year-to-date, but a recent rally saw it rise 43 percent from its bottom at the end of the first half of 2022.
Bitcoin has fallen 49 percent since the start of the year and is up 32 percent since mid-June, when it marked a corresponding low for 2022.
“Crypto is nearly four times more volatile than the S&P 500 – volatility is commonly measured by standard deviation, which shows a 4.3 percent year-to-date value for the Bloomberg Galaxy Crypto Index versus 1.3 percent year-to-date for the S&P 500, while the second is already an indicator for risky assets (since it is an index of shares)”, according to the analysis of Bloomberg analyst Adria.
Analysts believe that the recent higher rally in cryptocurrencies has been strongly fueled by investors apparently judging that most of the negative fundamentals have already been priced in. This is in line with the usual developments in global financial markets (eg the S&P has also been rising in recent weeks).
“It is assumed that there is medium-term growth potential given the attractive price level for entry into crypto-assets”, according to Bloomberg Adria analysts.
The recent rise in cryptocurrencies comes with renewed investor interest – interest in bitcoin is now at its highest level since November 2021.
Interest reflects the total number of futures contracts held by market participants at the end of daily trading. It is used as an indicator to determine market sentiment and strength beyond price trends.
The Adriatic region lags behind in terms of crypto-investments
According to TripleA data, the Adriatic region lags behind in terms of crypto-investments, with an average of 1.6 percent of crypto-investors in relation to the total population.
This is below the EU average of 3.3 percent and far below more developed markets such as the US and Germany at 14 percent and six percent, respectively.
Investors in Serbia are mainly oriented towards cryptocurrencies, with a share of 1.9 percent in the total population. After Serbia, residents of Slovenia have the most cryptocurrencies, 1.7 percent of the total population, followed by residents of Croatia (1.6 percent). The residents of Bosnia and Herzegovina (1.4 percent) and Macedonia (1.3 percent) invest the least in cryptocurrencies, TripleA data show.
Negative and positive outlook
Bloomberg Adria analysts have provided an overview of the negative and positive prospects for the future regarding the cryptocurrency market.
As for the negative outlook, the movement of cryptocurrencies depends on the global economy.
“As long as there is an assumption that the weakest period for the global economy is yet to come, and especially if there is uncertainty that persistent inflation plus geopolitical risks could fuel risk aversion, the outlook for riskier assets, including crypto, will be fundamentally negative. Sporadic recovery in stocks and cryptocurrencies it depends on the manifestation of the recession, that is, when and how deep it will be”, says chief analyst of Bloomberg Adria Andrej Knez.
As for the positive outlook, he adds that bitcoin is gaining momentum on its way to becoming a globally accepted asset as collateral in financial transactions.
“The best reason for that is, probably, that it never stops being traded, that is, bitcoin is traded even on weekends, unlike other financial assets”, Knez points out.
On a positive note, the data shows that bitcoin has been recovering, after bottoming out at 50 percent of its annual average.
“Bitcoin recovered and rallied when it touched half of its 50-week moving average (calculated as a 50-week moving average). Every time in history, a drop to around 50 percent of its 50-week average means building the foundation for an upcoming rally,” the analysts found BBA.
The drop in volatility in relation to technology stocks was also positively evaluated, because while it was previously claimed that cryptocurrency is a highly volatile asset, its volatility is decreasing.
The Bloomberg Galaxy Crypto Index (BGCI) is currently about twice as volatile (90-day view) as the Nasdaq, which compared to a peak of about eight times in July-August 2021 is better in terms of stability and as a basis for moving forward.
“Theoretically, miners accumulate positions during “bear” periods and sell during “bull” periods, however, the period from June 2021 to March 2022 is characteristic because large net accumulations of bitcoins have been created. This has created a significant excess supply. That excess supply is now expected to be eliminated as the last of the cryptocurrency market bear moves during the first half of 2022, which saw many marginal miners forced to suspend operations as their profitability came under pressure”, concludes the Bloomberg Adria analysis.