A former hedge fund analyst at Steve Cohen’s SAC Capital explains how Bitcoin has failed as a hedge against inflation. However, he also points out why Bitcoin and the leading altcoin Ethereum are still the best bets for retail investors in the crypto market.
Michael Wang: We want to change that!
Michael Wang, former senior analyst at Steven Cohen’s now-defunct hedge fund SAC Capital, states that the world is moving towards more transparency, and then later, Wall Street has a transparency problem. However, Wang states that the Los Angeles-based fintech startup is taking steps to fix this.
His new venture, Prometheus, is an alternative fund market combined with a social network. It facilitates investment in hedge funds, venture capital funds and crypto funds. Wang dates the platform as a fake LinkedIn for people who want to see more of what Robinhood and Coinbase have to offer them. Think how many doctors, lawyers, entrepreneurs and engineers you know. We want to change this.
Bitcoin’s reputation as a safe-haven asset has become questionable
Given how Prometheus allows users to invest in crypto funds, Wang said in the latest It is watching the area as widespread losses seen for several months. In terms of context, both Bitcoin and the leading altcoin Ethereum have lost more than 50% since their recent highs.
As you can see from cryptokoin.com news, there is debris in altcoin projects, perhaps none more violent than Terra USD and its sister cryptocurrency LUNA. Solana (SOL) is down 83% from its peak amid occasional outages in its network.
The fact that all this took place at a time when the US was seeing its highest inflation in 40 years dispelled the formerly popular notion that Bitcoin could act as a hedge against higher consumer prices. Instead, Bitcoin, and crypto in general, has functioned more like a traditional risk asset.
This explains why crypto prices fell along with stocks for much of 2022 in response to the Federal Reserve’s monetary tightening efforts aimed at cooling inflation and curbing an overheated economy. The central bank is preparing to announce significant rate hikes at its next two meetings. This situation seems to continue as the main wind for both crypto and stock investors.
Voted 2016 Hedge Fund Rising Star of the Institutional Investor, Wang said that crypto markets are highly correlated with the broader equity market and agree with the narrative that Bitcoin has failed as an inflation hedge. says.
But this correlation is just the beginning: Wang notes that Bitcoin has a ‘much higher beta’ than stocks, making it more susceptible to sharp downward fluctuations. Like most equity investors, Wang looks to central bank activity for signs of what’s to come in the crypto market:
The determinant for any asset class and asset price, whether crypto, stocks or real estate, is the Fed. is what it does.
What to buy amid the altcoin wreck?
Wang predicts that most altcoin projects will likely not survive long-term outside of Ethereum. He states that Bitcoin and Ethereum have large market caps and have seen enough mainstream acceptance to withstand bearish markets. Wang explains:
Your litmus test here for some stocks and cryptos is that if it doesn’t go bankrupt, you’ll probably make money by holding it for a year.
According to Wang, Bitcoin in particular will continue to gain traction as a borderless payment method that allows users to bypass remittance fees and slow transaction times. “Many parts of the world still don’t have banking services,” Wang says. Wang thinks that Blockchain can be used as a solution to help people in these fields.
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