Sorry, bitcoin investors, there’s no light at the end of the tunnel, according to one group of crypto-bears who expect the recent digital coin sell-off to persist as the market comes to realize that the world’s largest cryptocurrency by market capitalization is “essentially worthless.”
In a note Thursday, London-based investment research firm Capital Economics wrote that bitcoin is likely to fare much worse than other assets in the upcoming months, despite its close correlation to the broader S&P 500 index since the digital currency reached its peak in mid-December. (See also: Bitcoin May Fall By a Third in 2018: Study.)
“Bitcoin’s correlation with equity prices has strengthened recently, but we think that this will be just temporary. We still think that bitcoin is essentially worthless, meaning that it is likely to fare much worse than other assets in the coming months,” wrote Capital Economics. The researchers contend that bitcoin’s correlation with the equity market has been largely coincidental, as its series of crashes can be related to specific events and concerns such as a handful major banks banning customers from buying the digital currency on credit cards, heightened fears over regulation and a ban on cryptocurrency advertising from major media platforms such as Facebook Inc. (FB) and Twitter Inc. (TWTR).
‘Not a Credible Long-Run Alternative’
As for the future of the global equity market, analysts reflect the increasingly bearish sentiment on the Street, suggesting that rising interest rates and other concerns such as an impending global trade war should drag down stocks. Nonetheless, bitcoin’s demise will be attributable to its lack of value relative to traditional currencies, wrote the U.K. researchers, reiterating the notion that the factors driving down bitcoin prices are very different from those driving the prices of other assets.
“We expect equity markets to fall as investors cotton on to the fact that rising U.S. interest rates will slow economic growth. But the main factor driving down the price of bitcoin is likely to be a realization that it is simply not a credible long-run alternative to conventional currencies,” read the Capital Economics note.
At a price of $6,600.97 as of 4:07 p.m. UTC, bitcoin reflects a 460% gain over the most recent 12 months and a whopping 67% loss from highs reached late last year, according to Coinbase data. (See also: 1 in 5 College Students Used Loans for Cryptocurrency Investments.)