Simon Peters, market analyst
Bitcoin teases us at $12,000
Bitcoin recently broke through $12,000, only to suffer a significant fall to $11,275. But far from dispelling recent hopes for a bull run, its subsequent return to the mid and even high $11,000’s over the weekend suggests that we might be witnessing another new bottom for Bitcoin; drops below the old $10k resistance level are looking increasingly unlikely. Besides, there is a major difference between investors strategically unwinding their positions and the sudden, panic-driven drops that we saw in March as the coronavirus pandemic began to take hold.
Bitcoin’s burgeoning market cap warrants careful comparison
Currently approaching $200 billion, Bitcoin’s market cap is undeniably impressive and is closing in on the equivalent figures of major legacy financial businesses. It is already comparable to portfolio stalwarts such as Netflix and AT&T, and a rise towards the 2017 high of $300 billion would indeed align it with the likes of Mastercard and JP Morgan Chase.
Intriguing though this is, we believe that a comparison with gold would be more fitting. Their similar potential as inflation hedges makes them a more natural pairing and one that the industry should monitor closely – especially when we begin to experience the long-term effects of quantitative easing on reeling economies around the globe.
For anyone who doubts Bitcoin’s hedge potential, this week provided yet another wake-up call. Nasdaq-listed business analytics firm MicroStrategy confirmed that it has bought $250 million of the crypto asset, citing its “superiority [to cash] for those seeking a long-term store of value”. In previous newsletters I’ve emphasized that institutional investment is essential for a future Bitcoin bull run, and so this is certainly a promising development.
It is worth bearing in mind that a high Bitcoin price can sometimes create a psychological barrier for the retail investor. Just like investors can get fractional shares, crypto asset investors can hold fractions of bitcoins (Satoshis). Yet the fact remains that many retail investors will want whole bitcoins and the price of attaining them is moving further out of reach. It’s a psychological peculiarity, but a reality nonetheless – and a future barrier to further widespread retail investment. Such a barrier highlights the importance of institutional investment.
David Derhy, market analyst
Ethereum fees hit an all-time high, but a fall could be on the horizon
Ethereum fees hit an all-time high of $6.87 million on Wednesday. This milestone is to be expected, as Ethereum continues to be the go-to platform for DApps. As we take steps towards Eth 2.0, it is likely that those all-time high fees will drop.
The proof-of-stake mechanism means that users of the platform won’t have to compete with each other to complete transactions. We’ve also been impressed with the excellent documentation from the Ethereum team on how to stake. It is wonderfully coherent and widely accessible, which should be useful for future investors looking to receive staking rewards.
Meanwhile, Ethereum Classic continues to operate in ETH’s shadow having lost so much of its momentum in the fork. It is no surprise to see commentators calling for ETC to follow suit and switch to proof of stake sooner rather than later.
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