The world of cryptocurrencies can be similar to a chess match in the final minutes, when there are few stones left on the board and players go all-or-nothing. Regardless of the strategy used, the investor can either win or take a big checkmate. And this defeat seems even more certain, especially when we see bitcoin’s 64.22% drop in 2022.
For Top Gain cryptocurrency expert Raquel Vieira, the drop happened because of the rise in interest rates by the American central bank, the Federal Reserve. The Fed Funds rate went from a range between 0.25% and 0.50% a year to a level between 4.25% and 4.5% a year. “Currency tightening pushes investors from variable income to fixed income.”
According to Valor Investimentos specialist Virgilio Lage, the fact that cryptocurrencies are high-risk investments has caused a much greater capital flight than the traditional market. “The entire technology market suffers from high interest rates, so Nasdaq [principal índice de ações de tecnologia dos EUA] dropped 33% in 2022.” For 2023, expectations are not positive, since the last Fed minutes, released on January 4, reaffirmed the continuity of the interest rate hike cycle. According to the chief economist at Tenax Capital, Débora Nogueira, the expectation is for two more hikes in US interest rates. “We anticipate another 0.25 percentage point hike in February and possibly another 0.25 percentage point hike in March.”
That is, the investor can expect more volatility in the crypto world throughout 2023. However, this does not mean that it is impossible to make profits. According to the head of cryptocurrencies at Hurst Capital Murillo Alves, the 39% increase in bitcoin from January to the 25th is proof that it is still possible to profit. “We see the possibility of cryptoassets having a positive variation if there is a drop in inflation, which signals the beginning of interest rate cuts.”
According to XP, the ideal is to have a maximum of 8% of the portfolio in alternative investments such as cryptocurrencies. Having little exposure to these assets can be a solution to avoid checkmate.
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