Crypto Vs Stocks | When will the bitcoin decoupling happen?

Bitcoin's growth has quickly outpaced Nasdaq in the past 10 years. Bitcoin's price has grown from a mere 6 cents to as high as $69,000 after its introduction to the market. Right now, it's sitting at around 64.5 million percent return in the price of Bitcoin since 2010. In comparison, Nasdaq's return in the same period come to be nearly 650%, which is still great but is nothing compared to the growth of Bitcoin. So in this video, we're going to compare the crypto market with the stock market. As you may know or may not know, this is a crypto channel, so it could be a little bit biased, but I'm sure after watching this video, you'll be convinced by a plethora of benefits that crypto can offer over stocks. I also know that there's some narrative against Bitcoin for being linked to the stock market, especially tech stocks. So I'll also talk about the correlation between Bitcoin and stocks. If you like this type of content, I'd appreciate it if you could drop me a like and subscribe to the channel. There's so many things that crypto can offer, but stocks can't. For starters, Bitcoin has by far been proven to be the fastest horse in terms of ROI among any other investment options out there. And as far as it goes, Bitcoin does work like digital gold. So according to the stock to flow model, one Bitcoin can eventually be worth up to $1 million. The stock to flow model is applicable to Bitcoin due to the scarce and limited nature of supply. The model is usually applied to scarce commodities like gold, platinum. While stock is the existing supply of Bitcoin in circulation, flow refers to the number of tokens mined in a year. Obviously, it didn't accurately predict the price for it every single time, but it did give you a general idea of the price in the coming years. Second of all, Bitcoin is known as being permissionless. Being public and decentralized means very little if you have to be allowed in by some authority, because you earn the money and you should be able to spend it whenever you want. Its lack of permissions keeps Bitcoin open and fair for everyone, and so far we have proved that our society does need Bitcoin. In February this year, there was a protest in Canada regarding Covid restrictions, but the Prime Minister Justin Trudeau was not very happy with the protests and even went to the extreme to invoke emergency powers to seize the bank accounts of those who oppose lockdowns and mandates. Trudeau even wants to go further in hindering the financial support of the protesters by freezing and stopping them from transactions with digital assets like Bitcoin, but you will soon realize you can't because of its decentralized nature. Once you've got your funds in a non-custodian wallet, there's nothing the government can do to stop you from using your own hard-earned money. Crypto is doing more good than harm for obvious reasons. If you look at the invasion in Ukraine, it can penetrate a fork of war with donations, and for the past few weeks, we have seen the banking systems in Ukraine were being damaged by the war, which made it very difficult for families to send money to Ukraine, and crypto definitely offer a way out. The third advantage would be the transaction speed of Bitcoin over SWIFT. If you want to send money from one country to another, a very commonly used method is the SWIFT system, but it usually takes a few days to get the money. It's basically an invention in the 70s, which is completely archaic, and I'm not sure why we're still using it. And Bitcoin can completely replace it, because one of the advantages of cryptocurrency transactions is that it can be completed in a matter of minutes. Once the block with your transaction in it is confirmed by the network, it's freely settled and the funds are available to use. Some would argue that this is what Russia is doing to face sanctions, but I personally don't think this is the case, because blockchain is about transparency. It records all transactions publicly, which also means it's going to make crypto rather difficult for sanctioned Russia to use. Transparency is precisely why crypto is a terrible thing to use to face sanctions, and definitely a bad idea for criminals to use because it's going to leave a trace. Data shows that the share of illicit activity using cryptocurrencies had dropped to an all-time high of just 0.15% of all transactions last year. What criminals are mostly using are cash because you can't trace the history with cash. The fourth of front pages is the market accessibility. For the vast majority of investors, stock trading is generally restricted to set business hours. For example, stock exchanges based in North America tend to operate between the hours of 0.30 to 0.30. On the other hand, crypto markets never close, not even on holidays. Well, except when the websites are down, which is quite often seen in the space, but you can always use another platform, right? This makes it easier for people to take new positions and enter or exit the market whenever they want, regardless of where they live, and there's so much flexibility compared to the stock market. So far, we have learned that Bitcoin is a store of value, it's permissionless, but we often see that crypto has always been traded in tandem with the stock market in general. Usually, when the stock market drops 10%, there's a magnifying effect on the crypto market. When the stock market increased by 10%, then Bitcoin will increase by something like 20%, possibly more, and vice versa. For example, if you look at the COVID pandemic in early 2020, Bitcoin fell almost 50%, while stocks fell as much as 34%. So far, we have seen a strong correlation between stocks and Bitcoin, and this just seemed to be a phenomenon for the past few years. Most of the time, Bitcoin tracked with the S&P 500 and the broader equity market as a whole. We have seen Bitcoin not follow the S&P 500 before, but it only lasted for a few days in most cases. Bitcoin is still very heavily influenced by the general market. So you could be thinking, Jemmy, this defeats the whole purpose of cryptocurrencies then. Isn't it supposed to be a safe haven asset? A short explanation is that we're still very early in the crypto market industry. Whenever we see new technology forms, it takes time for mass adoption to occur. This can be referenced in the Gartner hype cycle. This is to give you a view of how a technology will evolve over time. Bitcoin right now could be slowly entering the slope of Enlighten, but we're still very early. It almost feels like the dotcom boom that we had in the late 90s when there was a sudden massive growth in the use and adoption of the internet. It's essential to note that while many dotcom stocks are no longer here to tell the story, one only needs to look at the likes of Amazon and eBay to understand that technology stock crash at the turn of the century was not a demise in its entirety. Statistically, 90% of crypto projects we see today will fail, so nothing out of ordinary here. There are no straightforward answers on how it is all going to shape up for the future. But one thing is certain, only the superior projects will remain and shape the future of the crypto market. In comparison, stocks have hundreds of years of history and so much larger in market cap. The stock market on Wall Street actually opened in 1792. There's no doubt that it's very established, therefore less volatility compared to crypto. To put things into perspective, the cryptocurrency market cap is worth roughly $1.7 trillion. It sounds like a lot of money. Well, it's actually a lot of money, but when you compare to the stock market, it suddenly sounds very trivial. The market cap of stock market is worth $91 trillion, so the stock market is 55 times bigger than all cryptocurrencies combined together. Are you suggesting that the crypto market takes another two centuries to mature and fully decouple from the stock market? Well, decoupling is slowly happening, and in fact, some say that the potential decoupling scenario between Bitcoin and the Nasdaq Composite can happen in the next two years due to the interest rate hikes. Digital assets will become more attractive as the Federal Reserve could be increasing the interest rate. The rate hikes could potentially make equities and real estate less attractive, and bonds are going to get crushed as the VAT goes from the only buyer to the only seller. So where does one invest when both stocks and bonds are falling? Well, a logical guess would be cryptocurrencies. Whereas crypto isn't a cash flow oriented thing, it's like gold. It can behave in a very different way from interest rate oriented products. When traditional macro markets go down, crypto tends to be correlated with them for a period for roughly 70 days before breaking the correlation. This is because crypto is a relatively smaller market growing at a much higher rate than traditional stocks. Therefore, it doesn't really matter for the Fed to raise the rate to 0.25% or 1%. It's not like a huge difference in the crypto market. Bitcoin's volatility has been a downtrend in recent years. The outlook portrays that Bitcoin has been gradually improving to become a dependable safe haven asset against rising inflation. As a result, its correlation with risk on assets such as tax jobs could decline in the future. In conclusion, crypto is small and exciting asset that has attracted a numerous amount of interest in a short period of time. If you're just starting out, you can invest only with the most speculative segment of your portfolio, the money that you can afford to lose. It's always a good idea to diversify your portfolio to lower your exposure to risk. As always, don't forget to have an amazing day, smash up the like button, subscribe to the channel if you haven't already, follow me on Twitter, Instagram and CryptoGems YouTube channel for more record updates, and I'll see you guys very soon.