Nasdaq and Bitcoin: a collapse foretold

2020 was the year of suspended happiness: the Nasdaq, which is strongly influenced by Big Tech (Apple, Amazon, Microsoft, Tesla, etc.), saw a very prolific period, gaining almost 30% thanks to a very favourable situation. 

Indeed, lockdowns have forced billions of people at home, stimulating purchases of multimedia tools, subscriptions and e-commerce in general. Transactions in crypto, and in particular Bitcoin, also grew during that period.

Now, in 2022, awakened from the torpor of artificial confinement within the home, users have somewhat abandoned technology in favour of other activities, returning to pre-pandemic life, and it is this that has perhaps caused a slump in quarterly and real terms stock performance. 

The growth of Nasdaq-listed stocks in 2022

This year, in just under five months, Nasdaq‘s major stocks have lost all the gains they accumulated in the previous year. 

And here we come to the black week for stocks and cryptocurrencies in which both the major stocks and the crypto world suffered a memorable collapse as a result of an economy that has been a crossfire for every financial product except gold. 

Netflix has dropped 74% since January; -5% for Apple, which has shown greater resilience, while Amazon followed Netflix’s fate by posting -39%. Finally -45% for Meta (formerly Facebook).

Are these values too inflated or a normal realignment? 

It is too superficial to dismiss investors by saying it was a “bubble” and would be ungenerous for the companies involved. What caused the real damage, however, was inflation that has long been underestimated by the Fed and other central banks, but also the commodities crisis and the war in Ukraine.

These factors apply to both the Nasdaq and cryptocurrencies, which have woken up in a new world since last week. 

Stablecoins and the case of Terra

Stablecoins such as TerraUSD and the crypto LUNA have taken a beating. Luna, despite being in Terra’s collateral, lost 99% in a single session until it was withdrawn from trading today. 

Bitcoin also suffered huge losses, reaching on Thursday a threshold we haven’t seen in a long time, $25,000. 

To be fair, BTC rebounded and was just under $30,000 in line with late December/early year values. 

The volatility of the crypto world

The rollercoaster of volatility is far from over also due to a changing picture. Central banks, especially the US central bank, are grappling with market instability and the fight against inflation, the true evil of the century. 

Expansionary monetary policies have ceased and rates are being raised by 50 basis points at a time, with seven hikes planned for the current year and future hikes for 2023/2024 until the cost of money is brought back to a safe threshold set at 2% by the Fed. 

In short, neither crypto nor tech stocks will disappear, but these market adjustments have made it clear how good the projects are and that despite huge losses they have prospects and value that are bound to become significant.