FOMO is alive and well in cryptocurrency, with less-known tokens outperforming again after recent rallies held by Ether and Bitcoin industry leaders.
Cardano, now the third-largest cryptocurrency, has seen its value double this month. Binance Coin is also on the rise. Avalanche, a token that tripled in August, has also increased. Prices for digital photos with laser eyes on rocks and cartoons of cute animals are exploding, sometimes even quadrupling, in the meantime.
Analysts and investors aren’t sure what is driving the frenzy. Some believe that speculators are shifting away from the mainstays and into newer, more exciting options, as they do often after large runs. Others see a world that is flooded with cash and at ultra-low rates which eventually pushes investors towards ever-more valuable assets. A few tokens have strong narratives backing them, such as technological advancements at the Cardano or Solana networks.
Yoni Assia is the founder and chief executive at eToro. He said that you can see the excitement in crypto in the industry’s numbers, regardless of whether they are looking at total volume or growth of companies.
Assia refers to it as a “generational buying moment” and cites a confluence a number of events including rock-bottom interest rates around the world as well as huge fiscal stimulus efforts that provided checks to many people during this pandemic.
A portion of the money was used to purchase cryptocurrencies and other related assets such as stocks of digital miners. According to The Harris Poll for Yahoo Finance, 15% of Americans who received their first two stimulus checks made investments with part or all of that money. About half of these individuals invested in cryptocurrency, according to a survey of over 1,000 adults in the United States.
Inflation has also materialized as economies reopen. This plays into warnings by crypto-faithful of imminent hyperinflation. Assia stated that all of this is ‘leading many people to look for different types of investments’.
A survey conducted by eToro revealed that nearly 25% of the 6,000 respondents own crypto. This number rises to almost 50% for the younger group. The average investor is expected to increase their crypto allocation over the next few months, and there is significant interest in altcoins and alternatives to Bitcoin and Ether.
Downloads of crypto trading apps are on the rise — Coinbase Global Inc. was ranked 11th in Apple’s iPhone app downloads according to App Annie (a mobile data and analytics provider). It was 23rd in its category for August. The ranks have been climbed by digital exchanges Voyager, Kraken and Crypto.com.
“With all the money that is floating around, it shouldn’t surprise that people are paying exorbitant amounts for digital pet rocks, and an endless number of digital assets that can easily be created,” said Michael O’Rourke (chief market strategist at JonesTrading).
He said that the space is dominated today by younger generations. They know nothing but a Federal Reserve that has been almost-perpetually accommodating. He said that crypto has attracted many people to the space because of its accessibility and lack of government regulation.
Assets under management for digital asset investment products have increased more than 57% to $55 billion since July. According to CryptoCompare data-tracker CryptoCompare, the average daily aggregate trading volume rose by more than 46% to $544million, marking the largest month-over-month increase since May.
Altcoins like Cardano and Avalanche have received a lot of attention. The Bloomberg Galaxy DeFi Index, which tracks the most important decentralized finance apps and protocols — has seen a 50% increase in its value since July’s beginning.
“There has been a lot of positive sentiment about crypto lately: NFTs have led the revival, and the crash in May is now behind us,” said Sam Bankman Fried, chief executive officer at crypto exchange FTX.
There are also other blockchains that want to compete with Ethereum. Avi Felman is the co-portfolio manager of BlockTower Capital. He said that now that Ethereum has been upgraded, speculators will turn their attention to rival blockchains and their tokens.
The U.S. equity markets are still setting records every day. The Meme stocks are also going crazy. Jason Urban, cohead of Galaxy Digital Trading said that crypto can only be a benefit when the market is in such a risky mood.
According to Wei Liang, DBS Singapore, the correlations between Bitcoin daily returns and the S&P 500’s annual returns were very low in the four years ended in 2019. This changed last year. He said that Bitcoin and U.S. stocks both fell during the pandemic and have since rebounded together.
Urban stated that people are now concerned about inflation and money supply. Historically, people have always suggested buying stocks to hedge against inflation. Urban said that crypto is also an option.