FOMO stays alive and well in the cryptocurrency world, with lesser-known tokens once again outperforming Bitcoin and Ether following recent rallies by industry leaders. Cardano doubled in size this month, becoming the third largest digital asset. Binance Coin is also on the rise. A token called Avalanche tripled in August. Meanwhile, prices for digital photos of laser-eyed rocks and cartoon depictions of cute animals are skyrocketing, sometimes quadrupling within a few days.
There is little consensus among analysts and investors about what is driving the frenzy. Some claim that speculators are moving from the mainstays to newer, more exciting offshoots, as they often do after big runs. Others see a world of cash and extremely low interest rates, which ultimately drives investors towards increasingly weird assets.
“There is no doubt that crypto is very excited,” said Yoni Assia, founder and managing director of the online exchange eToro. “You can definitely see it in the numbers in the industry, be it total volume or company growth,” he said, adding that “we’ve seen a lot of buzz in the market.”
Mr Assia calls this a “generational buying moment” and cites a coincidence of events, including global lows and massive fiscal stimulus measures that delivered checks to many people during the pandemic.
Some of that money went into cryptocurrencies and related assets, such as stocks of digital miners. About 15 percent of Americans who received the first two stimulus checks invested some or all of the money, and about half of that group invested specifically in cryptocurrencies, according to a survey of 1,000+ U.S. adults conducted by The Harris Poll was conducted for Yahoo Finance.
At the same time, inflation has set in with the reopening of economies, which takes into account warnings from some crypto creditors of impending hyperinflation. When you put all of this together, “it leads a lot of people to look for different types of investments,” Assia said.
A recent survey by eToro found that around a quarter of its 6,000 investors had checked out their own cryptos, a number that climbs to nearly 50 percent in the younger cohort. The company also noted that the average investor will increase their crypto allocation in the coming months and that interest in alternatives to Bitcoin and Ether or Altcoins is “significant”.
Meanwhile, downloads for crypto trading apps are on the rise – Coinbase Global Inc. ranks 11th among financial apps on Apple’s iPhone downloads according to App Annie, a provider of mobile data and analytics. Last August he came in 23rd place in his category. The digital exchanges Kraken, Voyager and Crypto.com have also advanced in the ranks.
“With all of this money floating around, we shouldn’t be surprised that there are people out there paying exorbitant sums of money for digital pet rocks and an endless amount of other digital assets that can be easily created,” said Michael O’Rourke. Chief Market Strategist at JonesTrading.
The space is dominated by younger generations, he said, and all they know is a Federal Reserve that has been forthcoming almost constantly. Take that alongside a gridlocked government, and it’s no surprise many have moved into the crypto space, he said.
Since July, assets under management for digital asset investment products have increased more than 57 percent to approximately $ 55 billion. The average daily aggregate trading volume rose more than 46 percent to $ 544 million, according to data tracker CryptoCompare, the largest monthly increase since May.
A lot of attention was paid to altcoins such as Cardano, Avalanche and the meme mainstay Dogecoin. Meanwhile, an index that tracks some of the largest decentralized financial protocols and apps – the Bloomberg Galaxy DeFi Index – has risen about 45 percent since early July.
“There has been a pretty positive crypto mood in general lately: NFTs helped lead the revival and the May crash is still in the rearview mirror,” said Sam Bankman-Fried, CEO of crypto exchange FTX.
And then there are the blockchains that want to compete with Ethereum. Avi Felman, co-portfolio manager at BlockTower Capital, said now that Ethereum’s recent network upgrade is complete, speculators are turning their attention to competing blockchains and their tokens.
Meanwhile, the US stock markets seem to be writing records every day. Meme stocks get crazy too. Jason Urban, co-head of Galaxy Digital Trading, said that crypto can only benefit when the markets are in such risk appetite.
In the four years to 2019, the correlations between Bitcoin and the S&P 500’s daily returns were generally low, according to Wei Liang of DBS in Singapore. But that has changed since last year. Amid the pandemic, Bitcoin and US stocks fell and rebounded together, he said.
“Lately, people have been worried about inflation, people have been worried about money supply – that’s why in the past people always said they would buy stocks to hedge against inflation,” Urban said. Now, he added, it’s crypto too.
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