Crypto comeback is just a “mean reversion” rally, says Bernstein
Bitcoin continued its New Year’s surge over the weekend to its highest level since mid-August. However, there are likely still some bumps to be taken before investors are out of this crypto winter. That’s an observation about the current crypto bounce that Bernstein analysts made in a note to investors on Monday. They called it a mean reversion rally, meaning they see bitcoin prices returning to their long-term mean or average levels. “We believe crypto’s mean reversion has some room left,” analyst Gautam Chhugani said in the note. “Bitcoin has never had two consecutive years of negative returns in its entire 14-year history. So we would be cautious about being bearish here. But is this the start of a new sustained rally? Unlikely.” Bitcoin reached $23,333.83 on Saturday, according to Coin Metrics. That was the highest level since Aug. 19 — after much of the damage from the Terra sinking and the bankruptcies of Three Arrows Capital, Celsius and Voyager, but ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech and the collapse of FTX. After ending 2022 down more than 60%, Bitcoin is already up 39% year to date. Ether is up nearly 36%. BTC.CM = 6M Mountain Bitcoin Nonetheless, Chhugani attributed the recent surge to capital already present in the crypto industry, namely “marginal stablecoins” being deployed. He said there have been “no new capital allocations to sustain this rally.” Additionally, “the market lacks a clear theme of innovation” to attract new capital, although there are some competitors, the analyst added. “DeFi could grow with the integration of real-world assets, or NFT gaming teams could start shipping the early alpha versions of their video games,” Chhugani said. “We would wait and see what innovation themes drive a new cycle, but we would continue to caution bears not to push pessimism too far for 2022.” As the crypto asset class becomes “more regulated,” Chhugani expects institutions in crypto positions this year, he said. More positive regulatory developments in Hong Kong could bring solace to institutional investors, the analyst added. – CNBC’s Michael Bloom contributed to this story.
https://www.cnbc.com/2023/01/23/crypto-comeback-is-just-a-mean-reversion-rally-bernstein-says.html Crypto comeback is just a “mean reversion” rally, says Bernstein
