Despite the bleak picture we painted for the broader U.S. economy in the 2022 macro update, we are bullish on crypto for the back half of the year.
While we think inflation stabilizes, it does so at a higher level disrupting the negative correlation for traditional safe-haven assets vis-a-vis equities. New alternatives need to be considered. Post-Merge ETH becomes not only an “internet bond” but a new type of hybrid bond with multiple desirable qualities for institutional investors. The narrative of Bitcoin being a better version of gold is further solidified. These narratives will drive flows into crypto as equities suffer. Post-merge, BTC and ETH correlation with equity markets will begin to gradually decline with periods of persistent negative correlation as early as Q4 2022. It would not be shocking to see the new 60/40 in the coming years be something like 60/30/10 equities, bonds, and crypto.
