What Happen If Bitcoin Crash – I think Bitcoin (BTC-USD) and Ethereum (ETH-USD) are rising due to excessive speculation and will soon crash when sentiment changes. Cryptocurrencies are like a leveraged version of the triple leveraged Nasdaq 100 (TQQQ) with the highest beta imaginable. There is a cult-like core group that believes that Bitcoin and Ethereum have value so they will never go to zero. However, when momentum falters and gamblers leave, they will fall, as they did in 2018.
While stocks and cryptocurrencies were on the rise at the end of 2017, we are now seeing greater participation from retailers. Just 6 months ago there was a lot of optimism, but now crap stocks (penny stocks) are leading the way instead of FAAMNG. This is a sign that we are at the end of the bubble. Investors who lose out on bearish stocks and cryptocurrencies will have nothing to hold on to when the momentum changes. They don’t pay dividends or buy back shares, which limit dilution of stakes in profitable businesses.
What Happen If Bitcoin Crash
Sen fund managers have no hope. The last remaining managers who like to short companies with weak fundamentals have done terrible things in the last few months. For example, Bronte Capital lost 5 consecutive months at the end of 2020. Their previous longest losing streak was 3 months (starting in March 2012). The foundation has clearly excelled since its inception until the end of last year. In the letter they wrote: “But you may know a young manager who is 100% this year. You want to get your money out. It hurts us to say – but we will understand when we see the results. If we do.” As crypto and loser stocks explode, new investors are taking advantage. Bronte is forced to pull her shorts back up because she is not working.
Terra Luna Crashes 97%, Trading At Half A Dollar; Now What?
As an individual investor, I can expect this bubble to last for many seasons in stocks or cash, but fund managers cannot sustain long-term performance as investors flee. As the chart above shows, they are forced to take a lot of risk. According to the bank’s January survey, 19% of fund managers take more than normal risk. Compared to last month, it increased by 6 points. Bank of America has $561 billion in client assets. Customers have been very bullish on corporate earnings since 2002. I agree with them because of the economic stimulus and economic recovery, but the high sentiment is concerning.
Sellers naturally follow suit. As I mentioned, stocks with the worst fundamentals are now outperforming as retail FAAMNG names start to pull away. Tesla and Neo are the 1st and 3rd most popular stocks on Robinhood (Apple is 2nd). As the chart below shows, stocks have done better this year because they have fallen. Sub-$1 stocks are up nearly 50 percent this year already. Remember, this is on top of the 1 trillion penny stocks traded in December.
In the past few years, devaluation has encouraged the trend that it doesn’t matter if the sources of value are correct. This has helped propel stocks like MSCI and Rollins to much higher levels. MSCI ( MSCI ) and Rollins ( ROL ) are trading at 48 and 72 times estimated 2021 earnings, respectively. I like these companies, but they are very expensive. The mantra that ratings don’t matter has turned into complete indifference to profits.
If speculators don’t care about profit, I understand why they trade cryptocurrencies that have no cash flow and no real value. As you can see from the chart above, unprofitable tech stocks have turned upside down. Most of the software stocks in these firms benefit from domestic trading. With the economy on the brink of recovery, I wonder how long it will last. Some online retailers profited from the shutdown.
What Would Happen If Bitcoin’s Price Crashes To Zero?
Retailers are stuck at home and have bonus money to play with. Also works for bitcoin and ethereum. Another incentive could be a $1,400 check, but with the highest number of hospitalizations in America and 4.7% of people vaccinated in the country, people don’t have to stay home without getting their money. Maybe the money doesn’t go into speculative financing.
As an individual investor, it is important to avoid FOMO. Tech stocks were tough for value investors to beat banks and energy in August, but it’s been relatively easy since vaccines. Great traders are consistent, manage their risks, pick their spots and stay smart.
Personally, I wouldn’t put my money into bitcoin or ethereum, no matter how much they grow. I know some investors think they would do great to put a percentage of their net worth into these coins, but they ignore the hype. In the short term, there is always something better than your portfolio. The goal is long-term returns, not tripling your money in a year. This is usually a high risk.
After the 2008 financial crisis, there was a lot of hype surrounding what investors called the 21st century housing bubble. I personally started following stocks in 2007 when I was a teenager, so I didn’t experience what the housing market was like in 2003-2007. However, it’s generally easy to see through the bubbles I’ve read. Don’t overdo it. Just because most investors in a Deutsche Bank survey see a bubble in the financial markets doesn’t mean you should buy the survey against it. In fact, the real anti-game is about escaping bubbles and being disciplined.
So What Happened To Crypto?
As the chart below shows, 89% of investors strongly or somewhat agree that there is a bubble in the financial markets. Although it is widely known that these are bubbles, many people invest thinking they can get out before the crash.
Even asking this bubble question will give you a very good idea of the situation we are in. So where are the balls? According to this study, the main bubble is in US tech stocks and Bitcoin. 10 Reading is an absolute bubble; Bitcoin is assigned a score of 8.7 (US Tech 7.9). It can’t be more than that. However, if Ethereum was added as an option, or if the option was cryptocurrency, the same response would be received.
In balls you will see intense action as opposed to gambling. We recently saw this on social trading site eToro (ETORO). The 13-year-old company with 17 million users reported 380,000 new accounts in 11 days (as of January 13). Its cryptocurrency trading volume is 25 times higher than this time last year. Some use a bonus that means their customers get $500 when they spend $5,000. This only supports the bubble thesis as companies try to lure traders into gambling. This is the type of advertising that sports betting sites do.
Of course, eToro is not the only cryptocurrency trading app. There are also the big boys: PayPal (PYPL), Square (SQ), and Robinhood (RBNHD). Remember that in 2018, cryptocurrency trading started to appear in robinhood when the bubble burst. This was done state by state, not all at once. Robinhood now has over 13 million users, all of whom can trade Bitcoin and Ethereum. It also offers several altcoins. This is the virtue that traders need to trade to promote crypto and trading software.
Crypto Is Crashing Again. Will It Come Back?
According to research conducted by Mizuho Securities, PayPal used the app to trade about 1/5 of the bitcoins. PayPal has 361 million active users as of Q3 2020. We know Square CEO Jack Dorsey is a big fan of Bitcoin. He also promoted it when discussing Twitter censorship, which has nothing to do with this topic.
Bitcoin is back as the most traded business in Bank of America research. As you can see from the chart below, the response to “Long Bitcoin” which was named the most traded trade, has doubled to 36%. FAAMNG shares have fallen significantly over the past few weeks, so I understand why some people are reluctant to call the tech.
The chart below shows the history of this study. Long technology was a crowded trade for most of last year, but that didn’t mean its demise. On the other hand, this is a great indicator that Bitcoin has reached the top of its last bubble at the end of 2017. As you can see, long Bitcoin was the busiest trade in September and December 2017.
