Crypto is recovering fast… but will it last?

Things move fast in crypto, but right now, things are moving fast in the wider world, too.

As more and more countries go into lockdown, markets have been hit hard. But even more than that, many people’s entire livelihoods have disappeared overnight.

Here in the UK, the government has promised billions in loans to businesses, but nothing (yet) to those businesses’ employees, to freelancers or to the self-employed.

As I’ve heard many people saying this week, “It’s no good getting a break on your income tax if you don’t have an income.”

Since this time last week (I’m writing this early Friday afternoon) the FTSE 100 has dropped a further 2.8%.

Meanwhile, over in the US, the New York Times reports that every citizen earning $75,000 or less will get cheques for $1,200 to help see them through what’s happening.

From the New York Times:

The 247-page bill would provide the $1,200 payments to those earning up to $75,000 a year; those earning $75,000 to $99,000 would get smaller amounts, and those earning more than $99,000 would get none.

And the S&P 500, on the other hand, has gained 2.06%.

It will be very interesting to see how long those cheques will run for, and if any other countries introduce a similar scheme.

I’ve written a lot about Universal Basic Income (UBI) over the last few years. If automation continues apace, it seems like the best solution humanity has to maintain people’s quality of life.

But I never thought it would be the US which brought it in first – even if former presidential hopeful Andrew Yang based much of his campaign around it.

Will the UK bring in a similar scheme? I guess we’ll have to wait and see.

Crypto is up 38% in the last seven days

But, what about crypto?

After all. That’s what you’re here for.

Well (again, at time of writing), crypto has been on a tear.

The overall market is up 38% over the las seven days, rebounding sharply from last week’s lows of $134 billion up to $185 billion.

And it’s mainly happened over the last two days.

This was what greeted us on Thursday:

And again, on Friday:

After this week’s rally, crypto is only down 3.1% YTD, which, as you know can be made up in a matter of minutes in crypto.

Meanwhile The S&P 500 is down 26.4%, the FTSE 100 is down 31.3% and gold is up 12% YTD, but down 1.5% for the week.

Which market do you think will have risen the most by the end of the year?

Why is crypto going up while the world’s major stockmarkets continue to tumble?

So, what’s going on… shouldn’t people be fleeing risky assets like crypto in a time like this?

Well, the word is, they already have.

As Coin desk put it earlier this week: “Retail Investors Are Buying the Bitcoin Institutions Are Selling, Traders Say”.

According to that article, and a few others, institutions have been offloading their crypto holdings to make up for major market losses, while retail investors have seen this as a buying opportunity.

A comment I read earlier today on Reddit summed up the situation pretty well:

I like that theory. It makes a lot of sense. But time will tell whether it’s accurate or not.

As we know, crypto can be up 50% one day and down 50% the next.

In theory, right now is a time for cryptocurrency to shine. As currencies are devalued by new waves of Quantitative Easing all over the world, crypto should gain against them because it can’t be devalued in that way.

However, because the crypto markets are so small, they are easily manipulated. So a few very rich people or institutions can change things in an instant.

And let’s not forget, the world will come out of this crisis. Like I said last week, this could prove to be the greatest buying opportunity since pre-2017.

Plus, crypto companies are full of remote workers anyway. As an industry, I imagine it is probably among the best able to cope with a worldwide lockdown.

But, again, as I said last week. It’s hard to make any predictions when the entire world is going through such a strange time.

And with major stockmarkets so low, they may look like much bigger bargains than crypto to people with money to invest.

However, they are full of companies that could be much worse hit by this pandemic than crypto companies, which, as I said, are full of remote workers.

Personally, if I had any spare money right now, I’d be putting some into crypto. But who is to say that “spare” money wouldn’t become very needed over the next few months, given everything that’s going on?

Afterall, the absolute number one rule of crypto investing is never invest money you aren’t happy to lose. Emphasis on happy. (See the other two golden rules here).

I think that’s it for today.

What next week will bring us is anyone’s guess.

But one thing’s for sure, it won’t be boring.

I’ll see you then.

Thanks for reading.

Harry