The Dow Jones Industrial Average was tough in a few weeks after a rather excellent bull race. Cryptocurrency is also facing an amendment. Could there be a relationship between two investment worlds?
We need to be careful when using obscure words like “bull and bear market” when crossing every investment space. The main reason for this is that cryptocurrency has gained 10 times more during its amazing 2017 “bull run”. If you put $ 1,000 in Bitcoin at the beginning of 2017, you could earn more than $ 10,000 by the end of the year. Didn’t experience anything like traditional stock investing. In 2017, the Dow has grown by about 23%.
I’m really careful when reviewing data and charts because I understand that you can tell the numbers what you want them to say. Just as crypto saw huge gains in 2017, 2018 saw similarly rapid corrections. The point I’m trying to make is that we need to try to be objective in our comparisons.
Many newcomers to the cryptocurrency camp are shocked by the recent crash. All they heard was how these early recipients became rich and bought lambos. To more experienced traders, this market correction was quite clear in the last two months due to skyrocketing prices. Many digital currencies have recently made many people millionaires overnight. It was clear that sooner or later they would want to take some of that profit from the table.
I think another thing is that we really need to consider the recent addition of Bitcoin Future Trading. I personally believe that there are major forces working here led by old guards who want to see crypto fail. I see futures trading and the excitement surrounding crypto ETFs as a positive step towards crypto mainstream and a “real” investment.
After saying all that, I started to think, “What if there is some connection here?”
What if the bad news on Wall Street affected crypto exchanges like Coinbase and Binance? Could it be that the two of them fell on the same day? Or if the opposite is true and it causes crypto growth because people were looking for another place to park their money?
In the spirit of not trying to slash the numbers and being as objective as possible, I wanted to wait until we could see the relatively neutral playground. This week is as good as any time it represents a period when both markets saw correction.
For those who are not familiar with cryptocurrency trading, unlike the stock market, exchanges never close. I have been trading stocks for over 20 years and I know very well where you are sitting on a lazy Sunday afternoon thinking,
“I really wish I could trade one or two positions right now because I know the price will change significantly when the markets open.”
Availability like that Walmart can also lend itself to a knee-jerk emotional response that can snowball in both directions. With the traditional stock market, people have the opportunity to hit the pause button and sleep through their decisions overnight.
To get the equivalent of a one week cycle, I took the last 7 days of crypto trading data and the last 5 for DJIA.
Here are the comparisons of last week as well (3-3-18 to 3-10-18). The Dow (which lost 20 of its 30 companies) lost 1330 points, representing a 5.21% decline.
Comparing Apple to Apple for cryptocurrency is a little different because Dow doesn’t exist technically. This is changing even though many groups are creating their own versions. The closest comparison at this point is to use the top 30 cryptocurrencies in terms of total market cap size.
According to coinmarketcap.com, 20 of the top 30 coins have declined in the previous 7 days. Familiar words? If you look at the whole crypto market, the size has dropped from $ 445 billion to 2 422 billion. Bitcoin, seen as the gold standard equivalent, fell 6.7% in the same time frame. Usually go to altcoins just as bitcoin goes.
Coincidence or causation? How is it that we have seen almost similar results? Was there a similar reason for the game?
While the fall in prices seems to be the same, I find it interesting that the reasons for this are completely different. I told you before that numbers can be deceptive so we really have to pull the levels.
Here are the main news items that affected Dow:
According to USA Today, “strong wage data raises fears of impending wage inflation, exacerbating concerns that the Federal Reserve may need to raise rates about three times this year, which it originally signaled.”
Since crypto is decentralized, it cannot be driven by interest rates. This could mean that in the long run, high-rate investors may be looking for higher returns elsewhere. This is where crypto can play very well.
If this is not an interest rate, then what is the reason for crypto modification?
This is due to the conflicting news of several countries, their position will certainly affect the market. People around the world are uneasy about whether countries will even allow it as a legal investment.
There has been some favorable news from congressional testimonies from Jay Clayton (SEC chairman) and Christopher Giancarlo (CFTC chairman) this past week. The implication was that they wanted to eliminate bad players and ensure AML rules were followed, they also wanted to allow innovation.
It certainly appears that the connection of similar results between the two worlds is uncertain.
We all know that the market does not like uncertainty. But uncertainty is fleeting. What causes anxiety one day can sometimes be solved overnight. There are times when the news is so surprising that it paralyzes the market for months or even years.
The key is to search all this information and understand what is real and what is not.
Since I’ve been on both stocks and cryptocurrencies for a long time, I believe that keeping a close eye on both can be quite rewarding. Opportunities for profit exist almost every day. This is especially true in crypto because I often buy a coin that has only dropped 30% in the last day and then dropped another 30%, but within a week I got back those and many more.
I would recommend staying as varied as necessary (this varies from person to person). There are days when one is up and the other is down. To boost morale, the option to log in to the account was a good day. If you have an account in both worlds, you can probably relate to it.
One thing is for sure, crypto is here to stay and will definitely make investing more attractive.