Analysts differ on the impact of the global economy on the price of cryptocurrencies

Alejandro Villarreal by Alejandro Villarreal - 02:22 PM Jun 14, 2019
Analysts differ on the impact of the global economy on the price of cryptocurrencies

One of the issues that cryptocurrency market analysts are currently paying attention to has to do with the factors in the global economy that affect the price of these assets. This is a growing interest as digital currencies gain adoption and maturity.

On this aspect, a team of analysts from the data provider Coin Metrics recently published a report in which it states that the price of cryptocurrencies does not seem to have a direct correlation with the occurrence of events in the global economy, linked to economic growth, inflation, and monetary policy.

The premise is based on the observation of the behavior of the cryptocurrency market in the face of two events that occurred in the course of this month of June in the United States, which did not generate significant variation in the price of cryptoactives.

The first event had to do with the announcement made last June 4 by the president of the Federal Reserve, Jerome H. Powell. The official said the central bank was prepared to sustain economic expansion if President Trump's actions weakened the economy with tariffs, trade wars or other issues. In this case, although Powell did not explicitly say he would cut interest rates, his comments sent a signal that led to a rise in U.S. equities.

The second event was released on June 7 and is linked to the U.S. labor situation, which has a significant flaw in payrolls and wage growth. As a result, U.S. stocks reacted again. However, these two events did not have repercussions on the price of cryptocurrencies, according to analysts.

The influence of various factors
Although the one-off event mentioned by Coin Metrics did not have a direct impact on the prices of cryptocurrencies for the week indicated, other analysts maintain that world economic events do have an effect on the ecosystem.

This highlights the way in which other events in the global economy have had effects on the price of cryptoactives. In that sense, the eyes are set on the possible role of the cryptocurrencies before the economic tensions that exist between China and the United States.

On this subject, SFOX Edge, a company specialized in analysis and research, published a report where it establishes a direct relationship between the increase in the price of bitcoin during the last month of May and the fall of the SP&500 stock index. A significant indicator, which shows the market capitalization of the 500 largest companies listed in the United States.

Based on this fact, it is expected that in a likely global recession, investors in traditional markets will become more interested in cryptocurrencies in order to use them as an investment hedge.

The founder of the Digital Currency Group, Barry Silbert, spoke on this subject and also related the increase in the prices of several cryptoactives in May to "the drama of the global economy". In his statements, he made the following observation: "If you look at the last five years when Brexit happened, Bitcoin went up. When "Grexit" happened, Bitcoin went up.

Thus, SFOX Edge and Silbert present a different position from Coin Metrics on the relationship between global economic events and Bitcoin, although it is essential to consider that the factors evaluated are various. SFOX Edge and Silbert establish correlations with more external and global events, while Coin Metrics only took into account events within the United States.

In this regard, it is worth mentioning one of the points made by the Coin Metrics team, when mentioning the difficulties in taking some correlations as definitive, since, in his opinion, it is still challenging to predict definitively how cryptocurrencies would perform in a global crisis scenario. They remember that the oldest cryptoactive, Bitcoin, has never existed during a worldwide recession.

About The Author
Alejandro Villarreal

Alejandro VillarrealAlejandro is a big time crypto enthusiast. He spends most of his day either writing about news and innovation about cryptocurrencies or finding the new hidden gem to add to his portfolio.


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