Amid bitcoin’s year-to-date price pullback, the first cryptocurrency’s performance outperforms several traditional stocks such as PayPal, Facebook or the Nasdaq index. Shopify and Netflix are among the worst performers in 2022, with declines of up to 60%, while bitcoin’s return decline is 11.6% at the time of writing this article.
Both traditional stocks and the bitcoin price have been affected by the geopolitical situation exacerbated by the Russia-Ukraine conflict. Also, by the Federal Reserve rate hikes that started in March and at least 5 more hikes are expected in 2022.
Stocks included in the S&P 500 and Dow Jones indices have been less affected than bitcoin, with declines of 7.16% and 3.76%, respectively. However, technology stocks in the Nasdaq index are down 15.56%, four points more than bitcoin.
To the extent that bitcoin, which this Thursday, April 21, fluctuates around US$42 thousand, keeps rising, the outlook for the first cryptocurrency may improve with respect to traditional stocks.
In bitcoin’s bull phase that peaked in November 2021, companies that had invested in bitcoin led by MicroStrategy and firms linked to bitcoin mining also fared favorably in the stock market, as their respective share prices experienced growth on par with the price of BTC. With the correction in the price of BTC, bitcoin-associated companies have experienced larger percentage declines than the price of bitcoin.
According to the Wall Street Journal, bitcoin-associated companies have lost as much as 60% this year. Where bitcoin’s loss is 11% over the same period, Coinbase has retreated 42%, while Riot Blockchain has fallen 34% in the same time. The market capitalization of public companies investing in bitcoin, which was US$100 billion, has fallen to US$40 billion.
MicroStrategy, for example, started the trend of investing in bitcoin as part of its strategic reserve in August 2020, and continues to invest in that cryptocurrency. Since the beginning of the year, MicroStrategy has fallen almost twice as much as bitcoin, by 21.18%.