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Crypto is crushing it… how is such a risky asset flourishing in such a fearful world?

Harry Hamburg
Harry Hamburg
. 3 min read
Crypto is crushing it… how is such a risky asset flourishing in such a fearful world?
Source: Reddit

Here’s something interesting.

While stockmarkets are still very much in the red, crypto has been on a (relative) tear.

And not just Bitcoin – which is currently up 4.9% Year to Date (YTD).

The entire crypto market is now – at 11:45am on the 24th of April – firmly in the green.

YTD crypto is up 13.6%.

And strangely it’s not even Bitcoin leading the charge.

Our ol’ favourites Ethereum and Tezos are way ahead in that regard.

Ethereum is up a staggering 45%.

And Tezos has more than doubled in price since the 1st of January – up 102%.

Even IOTA – which for a minute looked like the floor might fall out from – is up 3.75%.

Meanwhile, oil is at its lowest price for 18 years, the S&P 500 is down 14.1% YTD and the FTSE 100 is down 19.9%.

I realise that’s a lot of numbers to start today’s article off with. But they are really worth thinking about.

At the beginning of the coronapocalypse, it looked like crypto was going to fair the worst of all asset classes.

We saw drops of 45% in a matter of hours. And given that crypto is a very risky asset, it didn’t seem like people would be putting money back into it anytime soon.

What we’ve seen since then has been a steady climb to within 3% of where prices were before the panic set in.

Source: coinmarketcap

Of course, this being crypto, we could easily see another 43% drop by the time you read this.

But for the time being, crypto has weathered this storm better than any other major asset class.

Even very slightly better than gold, which is up 13.4% YTD to crypto’s 13.6%.

How can this be?

Shouldn’t people be fleeing risky assets for safe ones?

Crypto’s weakness is also its strength

Well here’s the thing, which is also what makes crypto such an exciting investment to follow.

A comparatively small amount of money moving in or out of the crypto market will have a colossal impact on prices.

That 43% drop I circled on the chart above was caused by $97 billion fleeing the market.

By comparison, on the 16th of March “Black Monday” the S&P 500 lost $2.69 trillion and dropped only 12%.[i]

So by the same token, it doesn’t take nearly as much money to come back into crypto for prices to get back up to where they were.

Remember, at its absolute peak, on the 7th of January 2020, when Bitcoin was over $17,000, Ethereum was over $1,000 and IOTA was over $4… the entire crypto market was only worth $830 billion.

The S&P 500 alone lost more than three times that amount on “Black Monday” and only dropped 12%.

And just for a fun yet completely unrealistic thought experiment… how much would Bitcoin, Ethereum and IOTA be worth with a $2.69 trillion crypto market cap?

(The same amount the S&P 500 lost on “Black Monday”.)

Well, if we ignore all the other variables and just extrapolate from the previous high:

  • Bitcoin: $55,096 – 629% up from today. Turning every £1,000 into £7,290.
  • Ethereum: $3,253 – 1,630% up from today. Turning every £1,000 into £17,300.
  • IOTA: $12.96 – 1,866% up from today. Turning every £1,000 into £19,660.

The thing is… many crypto investors do think about scenarios like that. And many have also seen the worst that the market can throw at them… and still have money in it.

So when crypto suffers another big drop, quite a few crypto investors inevitably see it as a buying opportunity.

And as long as you’re sticking to the three golden rules of crypto investing, then why not take advantage of those opportunities?

I think this is one of the main reasons crypto has been doing comparatively well compared to everything else.

The crypto community lives on gallows humour, I mean, Bitcoin itself has “died” more than 370 times.[ii]

And the vast majority of people who bought in at any time after early 2017 are likely down today.

Yet, crypto investors and the crypto community is still alive and well. And weathering the coronapocalypse better than any other investment you care to think of.

And most importantly, as you can see from the meme at the top of this article, their sense of humour is still intact.

Okay, that’s all for today.

Don’t forget, if you liked this article, you can buy me a pot of tea here.

Thanks for reading.

Harry


[i] Reuters

[ii] https://99bitcoins.com/bitcoin-obituaries/

Crypto NewsbitcoinEthereumIOTATezos

Harry Hamburg

This is all, just like... my opinion, man.