12K again...Why?...106
The market cap is only at $310 Billion, while this number seems high. When Bitcoin last hit 12K the market cap was nearer to 400 Billion than 300. What does this mean? Well, quite obviously more capital is going into Bitcoin than the broader market. This is reflected by the low market cap in comparison to Bitcoin’s price and the fact that Bitcoin’s dominance has hit almost 68% - levels not seen since 2017.
It is clear that capital is flowing into crypto, but it seems rather concentrated (at least for now) into Bitcoin.
Why is this?
Global uncertainty.
China and the USA are fighting with tariffs and currency devaluations in a tit-for-tat negotiation strategy to try and enter into a trade deal. Without going into the implications of each strategic tariff and devaluations, we can look at how the global markets reach to it…
“Stocks fell sharply Monday, with Wall Street joining a global equity selloff after China allowed its currency to fall to a more-than-10-year low versus the dollar after President Donald Trump rattled markets by announcing additional tariffs on Chinese goods late last week.
The Dow Jones Industrial Average DJIA, -2.16% was off more than 600 points at its session low and remains down 540 points, or 2%, at 25,945, while the S&P 500SPX, -2.21% dropped 61 points, or 2.1%, to 2,871. The Nasdaq CompositeCOMP, -2.85% shed 219 points to 7,785 a decline of 2.7%, as China-sensitive tech stocks came under pressure. The S&P 500 and Nasdaq on Friday logged their biggest weekly declines of 2019.”
The reason why I bring this up is because when stocks fall, and when we are in times of fear, Gold and other safe havens rise in value. Gold has hit a 6 year high due to the current trade war fears and for the first time, we may be seeing a correlation in Bitcoin too.
That begs the question… is Bitcoin considered a digital gold? Very possibly, and the rise and concentration of investments in Bitcoin suggests that funds, high net worth individuals and even retail investors are looking to cryptocurrencies as a hedge against global uncertainty.
For now, I think the concentration in Bitcoin will continue. However we will eventually see the capital flow into alts, especially with more people getting involved!
Keep an eye on other markets and the correlation cryptos might have, it’s very useful and telling for the future!
All the best,
Devin