First came the explosion, then the implosion, then the onset of winter – and now? In the weeks since mid-September, the crypto market has lost one thing in particular: the spectacle. Because the previous two years were characterized by quite exciting roller coaster rides, the once wild ride has now culminated in a sideways movement where not much happens either up or down.
Therefore, Bitcoin and Ethereum can be seen in relatively gentle pendulum movements, which only very rarely go beyond the upper and lower limits of 19,000 and 21,000 euros and 1,300 and 1,500 euros. In this corridor, the entire crypto market moves sideways. The market value of crypto assets has fluctuated between 940 billion and 1.05 trillion euros in the past three months. Although there are isolated outbreaks from time to time, one can generalize: the crypto market has stabilized at around one trillion euros.
Crypto assets and shares in lockstep
Crypto assets are not alone in their sideways movement. For several years, it has already been seen that Bitcoin and Co. have become increasingly closely linked to the ordinary stock markets and their movements. After the tech frenzy of 2021 with price explosions, inflation and above all the countermeasure from the US interest rate hike ensured that stocks (and especially tech stocks) were punished. And here, too, there is a sideways movement with small downward trends. The course for comparison:
- Bitcoin = orange
- Ethereum = Blue
- S&P500 = Turquoise
- Nasdaq100 = Yellow
- Dow Jones = purple
- DAX = dark green
- Stoxx 600 = Light green
At this point, it doesn’t look like prices may rise again anytime soon. Because investors are currently very cautious – to say the least. Because the market sentiment has fluctuated between “fear and extreme fear” for a long time – this is shown by the Crypto Fear & Greed Index as well as the Fear & Greed Index. Meaning: The fear of loss is greater than the appetite for potential gains.
There have always been dry spells like this in the crypto market. In 2020, for example, the Bitcoin price fluctuated between 8,000 and 10,000 euros for a long time. The fact that it has now stabilized around EUR 20,000 in recent months shows that it has found a (temporary) new bottom.
In addition, other asset classes or forms of investment are much more fun again. The end of the zero interest rate policy in the US and the eurozone also means that there will again be higher interest rates on forms of savings. However, the great renaissance of savings accounts is not to be expected, because inflation is around 10 percent, which is significantly higher than interest rates.
“Savings book is not suitable for long-term support”
“The recent interest rate hikes by the European Central Bank have made many savers sit up and take notice. But one thing remains clear. Savings accounts are not suitable for long-term provisions, and even if the ECB raises interest rates slightly, high inflation is still far behind . Not acting is certainly the worst option at the moment because money is guaranteed to lose value in a savings book or current account,” says Gerda Holzinger-Burgstaller, CEO of Erste Bank Oesterreich. “The inflation rate was above ten percent in September and will be between six and seven percent on average in 2022. So it makes sense to really think about an investment to preserve the value of the savings. It is important not to put all your eggs in one basket, but always to have a broad base when investing.”
Therefore, interest in ETF savings schemes is also increasing. Neobrokers such as Scalable Capital or Trade Republic have a large number of such ETF savings schemes on offer. Despite the economic crisis and the downward trend on the stock exchanges, there is no fall in securities in, for example, Austria. “It is gratifying that the Austrians are still dependent on securities. The current market environment is very good for ongoing savings. Fund savers with the amount already saved are of course also affected by falling prices. At the same time, however, they benefit from the fluctuating markets, because the average cost effect comes into play with the further payments. So if you can afford to keep saving, you should, because shares are cheaper to buy now than they were a year ago,” says Markus Kaller, securities expert at Erste Group.
Why ETF savings plans are smart even in times of crisis