Binance Coin is raising. Cardano has doubled in August, becoming the third-largest digital coin, while Avalanche has tripled. Meanwhile, prices for NFTs, mostly funny digital photos or cartoon depictions, are going mad, sometimes quadrupling in a few days.
Analysts and investors did not come to a consensus on what’s driving this craze. Some suggest speculators are moving from the main assets to newer, more exciting offspring after big rallies. Others see a flood of cash with ultra-low rates, which ultimately pushes investors toward more risky assets. Some tokens, like Cardano and Solana, are backed by strong technological advances.
“There’s no doubt that there’s a lot of excitement in crypto,” Yoni Assia, founder and CEO of online exchange eToro, said. “You can definitely see it within the numbers in the industry, whether it’s looking at total volumes or looking at the growth of companies,” he said, adding that “we’ve seen a lot of exuberance in the market.”
Assia calls it a “generational buying moment,” citing a crossing of various events, like record-low interest rates around the world with massive fiscal stimulus efforts during the pandemic.
According to a survey of more than 1,000 U.S. adults by The Harris Poll for Yahoo Finance, about 15% of Americans who received the first two stimulus checks invested part or all of the money, and about half of this group invested it in crypto.
Meanwhile, inflation has materialized as economies reopen, playing into the warnings from some crypto faithful of pending hyperinflation. All of this “leading a lot of people to look for various types of investments,” Assia said.
According to a recent eToro survey, about a quarter of the 6,000 investors are looking to own crypto, while for the younger strata, the share increases to nearly 50%. eToro also found that the average investor tends to increase their crypto exposure in the coming months and that interest in altcoins, alternatives to Bitcoin and Ether, is “significant.”
At the same time, downloads for crypto trading apps are rising. According to App Annie, a mobile data and analytics provider, Сoinbase Global Inc. ranked 11th amid finance apps in Apple Store downloads. Last August, it averaged 23rd within its category. Digital exchanges Kraken, Voyager, and Crypto.com had also up in the ranks.
“With all of this money floating around, we should not be surprised that there are people paying exorbitant amounts of money for digital pet rocks and an endless amount of other digital assets that can be easily created,” said Michael O’Rourke, chief market strategist at JonesTrading.
The space is dominated by younger generations, he said, and all they know is a Federal Reserve that’s been almost-perpetually accommodative. Take that, alongside a gridlocked government, and it’s no surprise many have gravitated toward the crypto space, he said.
By O’Rourke, the space is dominated by younger generations, and all they know is a Federal Reserve that’s been almost ever accommodative. He said that alongside a gridlocked government, and it’s no surprise many have gravitated toward the crypto sector.
Since July, assets under management for digital-asset investment products rose more than 57% to roughly $55 billion. Average daily aggregate trading volumes increased more than 46% to $544 million, the biggest month-over-month rise since May, according to data-tracker CryptoCompare.
A lot of the attention’s been placed on altcoins such as Cardano, Avalanche, and the meme token Dogecoin. Meantime, the Bloomberg Galaxy DeFi Index, an index tracking some of the largest decentralized finance protocols and apps, is up about 50% since July 1.
“There’s generally been pretty positive crypto sentiment recently: NFTs have helped lead the revival, and the crash from May is further in the rearview mirror,” said Sam Bankman-Fried, chief executive officer of crypto exchange FTX.
Avi Felman, co-portfolio manager at BlockTower Capital, noted that as Ethereum’s recent network upgrade is done, speculators are turning their attention toward rival blockchains and tokens.
While the U.S. equity markets seem to mark records daily, meme stocks are going bonkers too. Jason Urban, co-head of Galaxy Digital Trading, said that crypto could only benefit while the market’s in such a risk-happy mood.
According to Wei Liang at DBS in Singapore, correlations between Bitcoin and daily returns for the S&P 500 were generally small by 2015-2019. But since 2020, that changed. During the pandemic, Bitcoin and U.S. stocks have sunk and restored jointly, said Wei.
“Lately, you see people are concerned about inflation, people are concerned about money supply—because of that, historically, people always said buy stocks as a hedge against inflation,” Urban said.
And he added that the same goes for crypto now.