Among analysts and investors, there is little consensus on what is driving the frenzy
FOMO is still alive and well in the world of cryptocurrencies, with lesser-known tokens once again outperforming recent rallies organized by Bitcoin and Ether industry leaders. Cardano has doubled this month and become the third largest digital asset. Binance Coin is also up and running. A tab called Avalanche tripled in August. Meanwhile, the prices of digital photos of laser-eyed rocks and cartoon depictions of cute animals are going to be gangbusters, sometimes quadrupling in a matter of days.
Among analysts and investors, there is little consensus on what is driving the frenzy. Some claim that speculators are moving from the fundamental pillars to the newer and more exciting ones, as they usually do after big runs. Others see a world flooded with cash and ultra-low rates, which ultimately pushes investors toward ever-winning assets.
“There is no doubt that there is a lot of excitement in cryptography,” said Yoni Assia, founder and CEO of eToro online exchange. “You can definitely see it within the industry figures, whether it’s total volumes or business growth,” he said, adding that “we’ve seen a lot of exuberance in the market.”
Assia calls it a “generational buying moment” and cites a confluence of events, including fund interest rates around the world, as well as massive fiscal stimulus efforts that handed out checks to many people during the pandemic.
Part of that money has gone to cryptocurrencies and related assets, such as shares 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 more than 1,000 northern adults. -American conducted by The Harris Poll for Yahoo Finance.
At the same time, inflation has materialized as economies reopen, playing on the warnings of some crypto loyalists about pending hyperinflation. Put it all together and “lead a lot of people to look for different types of investments,” Assia said.
A recent eToro survey found that about a quarter of 6,000 investors requested their own cryptography, a figure that rises to nearly 50% for the younger cohort. The company also found that the average investor was expected to increase their cryptocurrency allocation in the coming months and that interest in alternatives to Bitcoin and Ether, or altcoins, is “significant.”
Meanwhile, downloads of cryptocurrency applications are on the rise: Coinbase Global Inc. ranks 11th among Apple iPhone download financing apps, according to App Annie, a mobile data and analytics provider. Last August he averaged 23 within his category. Digital exchanges Kraken, Voyager and Crypto.com have also advanced in the ranks.
“With all this money floating around, we shouldn’t be surprised that there are people who pay exorbitant amounts of money for digital stones and an infinite amount of other digital assets that can be easily created,” said Michael O’Rourke, head market strategist at JonesTrading.
The space is dominated by the younger generations, he said, and all they know is an almost perpetual Federal Reserve. Take it, alongside a blocked government, and it’s no wonder many have gravitated toward cryptographic space, he said.
Since July, assets managed for digital asset investment products have increased more than 57%, to approximately $ 55 billion. The average daily aggregate trading volume rose more than 46%, to $ 544 million, the biggest month-on-month rise since May, according to data tracker CryptoCompare.
Much of the attention has been devoted to altcoins like Cardano, Avalanche and the main Dogecoin meme. Meanwhile, an index that tracks some of the largest decentralized funding protocols and applications, the Bloomberg Galaxy DeFi index, has risen about 45% since early July.
“Overall, there’s been a pretty positive crypto sentiment recently: the NFTs have helped lead the revival, and the May crash is even more in the rearview mirror,” said Sam Bankman-Fried, exchange CEO of FTX cryptography.
And then there are the blockchains that want to compete with Ethereum. Avi Felman, co-manager of BlockTower Capital’s portfolio, said now that the recent update to the Ethereum network is done, speculators are turning their attention to rival blockchains and their tokens.
Meanwhile, U.S. equities markets appear to be posting daily records. Meme stocks are also going to be unknown. Jason Urban, co-head of Galaxy Digital Trading, said that when markets are in such a risky mood, cryptography can only benefit.
During the four years ending 2019, the correlations between Bitcoin and the daily returns of the S&P 500 were generally small, according to Wei Liang at DBS in Singapore. But that changed from last year. In the midst of the pandemic, shares of Bitcoin and the United States have fallen and rebounded jointly, he said.
“Lately, you see people are worried about inflation, people are worried about the money supply; because of that, historically, people always said to buy stocks as hedging against inflation,” Urban said. Now, he added, it is also cryptographic.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)