Cryptocurrencies have been on a steep decline this year, with Bitcoin breaking through the $20,000 mark this week and Ethereum falling below $1,000. As Wall Street reported earlier, cryptocurrencies are now worth around $900 billion, down from $3 trillion in November.
Mark Mobius, co-founder of Mobius Capital Partners and known as the "father of emerging markets," said in an interview on Wednesday
If you're a stock trader, it might be time to turn your attention to cryptocurrencies.
Mobius argues that cryptocurrencies are a measure of investor confidence, and that when bitcoin falls, the Dow falls the next day, creating a pattern that reflects bitcoin as a leading indicator.
As for how to use this "leading indicator", Mr Mobius says:
It is only when institutional and retail investors really 'throw in the towel' and stop putting money into the market because of losses that confidence really hits its nadir, and that is when they start buying stocks.
As long as bitcoin investors are still talking about bargain-hunting, that means there's still a glimmer of hope, which means we haven't reached the bottom of the bear market yet.
Fears about the risk of a global recession have wiped hundreds of billions of dollars off the value of bitcoin, which is down about 70% from its peak and trading around $20,000. The decline followed a fall in the closely watched MSCI World Index into bear market territory as investors worried about the impact of interest rate hikes in most countries and disruptions to global supply chains.
Mobius, one of the world's most renowned investment gurus, is a larger-than-life figure in global asset management, winning accolades and global acclaim for his investments in emerging markets. He previously worked at Franklin Templeton for more than 30 years, where he was responsible for 15 emerging markets analysis teams and managed a successful emerging markets portfolio. He said he currently prefers to hold some cash and might invest in Indian stocks in building materials, software and medical testing.
By the time of Posting, bitcoin had once again fallen below $20,000, trading near $19,968, a year-on-year decline of 58%.
