Several matters have cropped up in the past two weeks that have significantly affected the crypto market. Some affects have been negative, while others have been positive. Although, the positive affects are definitely in the minority. In all, the total market cap of the space has declined by 25%. Was it Elon, China or the IRS that had the greatest impact?
Please note, BlackBull Markets do not offer the option to trade cryptocurrency on a live account. We offer forex, indices, US stocks, and commodities.
Gemini, the US-based crypto exchange, surveyed 3000 US-based investors. The result gives a snapshot of the general sentiment held toward crypto assets. A few illuminating facts are contained in the 16-page report. Perhaps the most exciting facet relates to how the demographic of crypto holders might radically change in the next wave of adoption.
The headline says it all – market euphoria has reached an all-time high. However, given the events that have occurred in 2020, it feels like it is just another day at the office. For the most part, it is.
Bitcoin reached an all-time high earlier in the U.S Trading session, touching $43,000. This is primarily due to Tesla CEO, Elon Musk, revealing in an SEC filing that they had purchased over $1.5 Billion in Bitcoin in January.
They stated that they invested “To further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity” - or in other words, a bet on Bitcoin using cash not required to run the business. They also stated that they “expect to begin accepting bitcoin as a form of payment for our products in the near future.”
This interest in cryptocurrencies does not just stick to Bitcoin. The meme currency Dogecoin has returned to all-time high levels at around 8 cents after many celebrities like Snoop Dog and, of course, Elon Musk, continue to talk about the currency.
Like I wrote in my previous article, it was relatively common for people to hold hundreds of thousands, if not millions, of Dogecoins in 2014. Assuming those people held them till now, we would have miners and investors with life-changing wealth – all from a meme currency.
In the commodity markets, Oil has made a legendary comeback. Brent Crude topped $60 as vaccines, and unexpected Saudi cuts have made tailwinds for the Black Gold.
However, some analysts are concerned about the quick rise in price, stating that further tension between Russia and Saudi may ensue due to the higher prices. The last time Russia was not on board with OPEC, prices plummeted below $30 a barrel. Brent currently sits at around $60.60 a barrel.
Equity markets saw a breath of fresh air, with the Dow Jones, S&P 500, and the NASDAQ up over 0.4%. Stimulus positivity, alongside vaccination numbers, boost the possibility of a strong fiscal 2021.
John Stoltzfus, Chief Investment Strategist at Oppenheimer, stated, “as people feel safer, investors can expect the economy to experience a rebound that should contribute to revenue and earnings growth as the economy reflates.”
At such inflated valuations in many asset classes, investors and traders should be ready for a sudden pullback on any negative sentiment.
Around seven years ago, in 2014, 15 year old me was intrigued by cryptocurrencies. At the time, Bitcoin was hovering around $800, and the talk of the town was no how much cryptocurrencies were worth but how increasingly harder it was to mine. The “Explain like I’m Five” rundown for crypto mining is that computers figure out blocks of mathematical equations, and for doing so, get allocated Bitcoin/crypto.
The higher a computer’s contribution, the more Bitcoin they receive. The better the computer, the higher the contribution, the more coins the computer gets.
As more and more Bitcoin get mined, the harder the mathematical equations get. Therefore, there becomes a point where a lower powered computer’s contribution will reward them with less Bitcoin than it cost to power the machine, becoming not worth mining it.
My computer wasn’t the best – so mining Bitcoin around this time was not an option as I would’ve received barely any Bitcoin (Remember, I was a 15-year-old that would have never thought Bitcoin would’ve reached the levels it’s at right now.) However, other cryptocurrencies still provide some yield for your electricity bill. The one I picked? Dogecoin.
At the time, I mined around 30,000 Dogecoin, which was worth maybe $8 U.S Dollars. It is now worth $1,500 U.S Dollars. Jackson Palmer, an Australian programmer, created the coin in 2014 and has admitted to making the coin as a joke. Now, assuming people held on to their coins, some serious money is currently circulating around. It would be normal to see people donating 50,000 – 100,000 coins to random people on the /r/dogecoin subreddit. Many people held millions in Dogecoin, which is now undoubtedly worth way more than they would have ever expected it to be worth.
I bring this up because Dogecoin, unlike Bitcoin, has an infinite number of coins that can be mined. Therefore theoretically, the value of Dogecoin shouldn’t rise to a significant amount. The reason why Dogecoin is worth around 5 cents now is due to the rise of retail traders. Sprinkle that with the recent endorsement for cryptocurrency by the wealthiest person in the world, Elon Musk, and you have yourself a recipe for the most unexpected generation of wealth.
The retail trader has seen their influence in the limelight recently, with their collective power inducing one of the most legendary short squeezes of all time with GameStop. Now, they are one of the main factors contributing to the run in Dogecoin. Are there any fundamental reasons in the run-up to Dogecoin? Not really. However, this shows what retail traders can do collectively.
Many institutions are now, if not they should be, looking at what retail traders are looking at to lower their risk, like what happened to GameStop.
What’s next, retail traders?