Cryptocurrency Outperformance Reflects Market's Bullish Risk Appetites
Recession odds have declined, and crypto stocks are soaring. Here are 2 picks to watch right now.
This story originally appeared on WallStreetZen
The stock market has been on a relentless rise since bottoming in early April as tariff fears reached a crescendo. Since then, the administration has backed off its extreme stance and chosen a more moderate approach.
Already, recession odds have drastically declined, and the market seems willing to look past near-term disruptions that could result due to tariffs. This explains the stock market's V-shaped bounce.
Cryptocurrency Outperformance
Interestingly, cryptocurrencies are one one of the strongest parts of the market in this post-tariff period. Even during the decline, the sector demonstrated relative strength. While most assets made lower lows, between late-March and early-April, bitcoin formed a double-bottom.
And, it continues to lead on the upside, as it currently flirts with all-time highs, while broader markets remain firmly below their all-time highs.
Given the inherent risk of the sector, this behavior during a period of risk-aversion in financial markets is certainly noteworthy.
In fact, this type of relative strength into and out of market bottoms is often an indication of institutional accumulation and a harbinger of future outperformance. Recent examples include AI stocks out of the market bottom at the end of 2022 and tech stocks in March 2020.
In both instances, the bullish price action and early leadership out of market bottoms was an indication of favorable fundamental developments and marked the beginning of multiyear bull markets.
Secular and Cyclical Drivers
Certainly, crypto's bullish technicals are also supported by positive long-term fundamental developments, coupled with cyclical catalysts.
In this cycle, crypto has proven itself to be an effective 'store-of-value' against inflation. Additionally, it benefits from current fiscal dynamics where developed economies are dealing with rising deficits and soaring rates which is also the fuel behind gold's recent strength.
In terms of longer-term catalysts, traditional financial institutions continue to increase exposure to the sector from an investment and operations perspective. Further, the increasing number of ETFs means that the asset class opens up to a much wider audience of potential investors including financial advisors.
2 Stocks to Consider
Investors seeking exposure to this crypto boom can consider stocks like Bitcoin Depot (BTM) and BGC Group (BGC). Both stocks are rated a Strong Buy (A) by the Zen Ratings. A-rated stocks have posted average annual performance of 32.5% which handily beats the S&P 500's average annual gain of 10.8%.
Notably, BGC is up by more than 33% since its low on April 7, while the more speculative BTM is up by more than 150% since early-April.
BCG is also part of the Zen Investor portfolio. Each stock in the Zen Investor portfolio is hand-picked by 40+ year market veteran Steve Reitmeister, who uses a rigorous 4-step screening process to locate the highest-potential stocks. Click here to check out other stocks in the Zen Investor portfolio.
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