Crypto markets on track to outperform the S&P 500 in Q3 2022

Yahoo Finance reporter Dave Hollerith details how crypto markets are set to outdo the S&P 500 in Q3 this year and what's driving it.

Video transcript

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- For many sectors lag the S&P 500 during a turbulent third quarter, oddly enough, though, bitcoin actually outpacing the major averages at least for the time being. Our David Hollerith is here to explain what the last few months have really been like for the sector. So, David, tell us how it's all been going.

DAVID HOLLERITH: Pretty rough.

- Oh, I think you're on mute there, David. There you go.

DAVID HOLLERITH: So, obviously, crypto had a pretty rough first half of 2022. And in that series of events, a lot of leverage came out of the system. Since July 1, up to this week, we've seen cryptocurrencies trade volatility. But following the Federal Reserve's key interest rate decision last week, they've actually held up better than other risk assets. And if the trend continues for the next four days, we're likely to see bitcoin outperform or show relative strength to the S&P and perform slightly better than the NASDAQ going into this next quarter.

So what it all means, essentially, I think, is that it's a little early to declare winners at this point, but it is an interesting trend because I think it illustrates that a lot of the leverage that has typically swung the markets may have left the system. It's not necessarily a sign of Wall Street interest, but it is a preferable investor signal given how all risk assets are, sort of, underperforming the dollar at this point.

- So it seems like doing better than that a bad bunch so far. But, of course, we still have four days to go until the end of the quarter. So what's important to watch this week?

DAVID HOLLERITH: Yeah, so that gets to the other part is-- I mentioned a lot of leverage has left the crypto markets. But, at the same time, there's options expiring on Friday, and that's end of the month and end of the quarter options. So this could be a hefty sum.

For bitcoin, the levels of open interest or the amount of options contracts that are currently open are relatively low compared to where it's been in the first half. But for Ether, a lot of this is tied to its merge upgrade, which is obviously already happened and turned out to be a sell the news event. And that's actually the highest it's been since 2021 of December. So we're watching that. And that could result in, sort of, a volatile swing either way.

- And we know, altogether, year-to-date, it has been a tough year for Bitcoin, down about 60% year-to-date. Thank you for keeping an eye on all of that for us. Our very own Dave Hollerith.