When the first pandemic occurred, cryptocurrency investors began feverishly reducing the overall risk of their asset portfolio.
This sentiment has changed since then, and with it, it has the tone of a chief economic adviser who had previously told investors to “buckle up” and prepare for the worst. The increase in interest rate risk can help the cryptocurrency’s high-risk asset class to return for a long time.
Optimistic chief economic advisor when risk tone returns
Fearing the unknown and the uncertainty about the future impact that the blocking conditions would have on the economy, an insane investor selling everything and everything caused a liquidity crisis now known as Black Thursday .
The massive sale has crushed the stock market and even precious metals, gold, silver, palladium, etc. Persistent economic constraints also led to a sharp drop in negative territory on the oil market.
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High risk illiquid crypto assets like Bitcoin, Ethereum and many others were wiped out during the collapse. The Chainlink flash crashed to near zero in madness.
But the economy is reopening, the curve is flattening and investors are taking risks again, according to Mohamed El-Erian, chief economic adviser of Allianz.
Quoting “good news in all areas” the economist says now he sees a “positive risk tone” that we haven’t really had in a long time. “
Although he warns that the economic recovery will not be a “smooth process”, there is “a great hope” that the return to the feeling of risk will be lasting. This is a much more optimistic outlook than the tone El-Erian has previously taken, warning investors to “wear your seat belts”.
Crypto Comeback Possible if risk appetite is maintained
The return to risk will increase stocks, but cryptocurrencies may rise.
After more than two years of downtrend, these assets are oversold and have recovered from low prices upon the arrival of Black Thursday.
The crypto asset class has recently come under the spotlight for institutional investors due to its digitally limited offer. Limited supply assets can hedge against inflation as the Federal Reserve adds trillions of dollars to its budget sheet.
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This stimulus effort can also help boost crypto assets. Investors who have stimulus money to spend risk what they perceive as free government money. Putting it in danger may seem globally less risky compared to betting on hard-earned funds themselves.
Coinbase data shows that cryptocurrency purchases on the exact number of stimulus checks that have been issued increased after they started reaching taxpayers.
Anything that feeds the risky tone could cause a complete return to cryptography.