Markets
Marex Solutions believes rotation out of large-cap US stocks could benefit cryptocurrencies
Wall Street’s pivot toward small-cap stocks from mega-caps could fuel gains in the cryptocurrency market, Marex Solutions told CoinDesk on Wednesday.
Since July 8, the Nasdaq, Wall Street’s tech-heavy index of 100 stocks, including the Mag 7 (Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla), has been trading at around 2,270 points. At the same time, the Russell 2000, a small-cap index, has jumped more than 12%, according to the TradingView charting platform.
It’s a sign that investors are pulling money out of the biggest tech companies and putting it into smaller companies that until recently lagged the broader market. The Wall Street Journal attributes The newfound love for small caps has helped cool inflation and boost confidence that the Federal Reserve will cut the benchmark borrowing cost this year.
Sector rotation could be the most important macro factor for cryptocurrencies, according to Ilan Solot, senior global strategist at Marex Solutions, a division of global financial platform Marex that specializes in the creation and distribution of custom derivatives products.
“As the steam clears from Mag 7, money will look for other places to deploy. Small caps are the knee-jerk reaction, but I think cryptocurrencies will benefit from this rotation,” Solot said in an interview.
Solot’s perspective contrasts with the widespread perception in the cryptocurrency market that Nasdaq trends alone determine digital asset valuations.
Traditional institutions and investors may have already started allocating money to cryptocurrencies, as evidenced by the renewed demand for U.S.-listed bitcoin spot. (BTC) exchange-traded funds (ETFs). All 11 funds recorded a cumulative increase net inflow of $422.5 million On Tuesday, the highest amount in six weeks. The total inflow over the past three days has exceeded $1 billion.
According to Solot, the sector rotation could be particularly favorable for Ethereum’s native token, ether. (ETH)and the imminent debut of ETH spot ETFs.
“The ETH ETF could come at the perfect time as AI tech investors look for alternative themes,” Solot said.