With a solid rebound in March, crypto investment analysts appear to take a more bullish tone on the sector going forward.
"Recovery is on track this week, with Bitcoin performing better by over 7% and Ethereum by 16% since last week,” said Eliézer Ndinga, Director of Research at Index Token Issuer Amun. “Avalanche is also up by a whopping 28.7%; a development that may be attributed to the increasing interest in the NFT ecosystem when gauging the 48% jump in the network’s NFT sales, as well as the excitement surrounding the expansion of Terra’s Anchor money-market protocol onto the AVAX network.”
Ndinga said the market has gained a “mildly bullish” momentum on the back of massive outflows occurring across exchanges for Bitcoin.
“This might be signaling that institutional investors and high-net-worth individuals could be capitalizing on this $38k-to-$42K price level for withdrawing their BTC holdings into their cold storage for long-term holding. A precursor that usually occurred before a rally, as shown below in November of 2020, and September of 21.”
Crypto’s also seem to be firming up their reputation as an alternative asset in times of stock market strife. That may be the case, but industry experts preach caution when steering cash into crypto assets.
“Cryptocurrencies can be a good potential alternative asset. Just don't confuse them as a store of value like gold,” said Doug Milnes, head analyst at Money Geek.
Money Geek has a new report out rating the differences between investing in stocks and investing in cryptocurrencies – let’s take a look at some key findings.$1,000 invested in cryptocurrency grew to $27,000 over five years. From 2016 to 2021, that's a compound annual growth rate of 94%.
- The S&P 500 outperformed the cryptocurrency index in 2021. From 2013 to 2022, cryptocurrency was four times more volatile than the S&P 500 over the same period and 26 times more volatile than bonds.
- After an initial period of lower correlation between assets, cryptocurrency and stocks have become more correlated through 2021 into the start of 2022, suggesting that cryptocurrencies may not be viable as a store of value.
- Incorporating cryptocurrency as a small percentage (3%) into a moderately aggressive long-term portfolio of 70/30 stocks/bonds from 2017 to 2021 would have led to 42% higher investment returns. This comes at the price of 18% higher portfolio volatility.
“Our analysis found that both stocks and cryptocurrencies have the potential for significant returns and losses in portfolio value,” MoneyGeek’s Geoff Williams reported. “If your investment horizon and risk tolerance are suitable for these investments, our analysis pointed to the benefits of investing more in stocks than cryptocurrency.”
“However, it also found that holding a small proportion of cryptocurrency investments can also be useful.”
With cryptos on the upswing, here’s what TheStreet’s investment experts are looking at in the sector this week.
Here’s Where Bitcoin and Dogecoin are Headed.
Cryptocurrency owners have been enjoying the last couple weeks of trading, with bitcoin, ethereum and dogecoin surging off the lows. That's got the minors moving, too, said TheStreet’s Bret Kenwell
“While the equity markets have enjoyed the last few trading weeks, so has this group,” Kenwell said. “To see both rallying adds to the “risk-on” observation, in my opinion. “
As cryptos have been crushed this year, some sort of bounce should be expected.
“It’s gone further and longer than most investors had expected,” Kenwell noted. “When I look at bitcoin, I see a 27.5% rally from the mid-March low to Monday’s high. In that stretch, it has been up in 11 of the last 15 sessions and has now closed higher in seven straight sessions.”
How much longer can the rally continue? Kenwell pitches in with a close look at the charts.
“On Sunday, March 27, bitcoin made what I refer to as a “deliberate” breakout,” he said. “The reason I call it deliberate is because the asset pushed through several significant levels when it could have easily rallied to this area and failed.”
Yet bulls deliberately jammed bitcoin up through this key zone. That zone was $45,400 to $45,900.
In that area, bitcoin had prior support turned resistance ($45,400), followed by last month’s high at $45,900,” Kenwell said. “Clearing February’s high gave bitcoin a monthly-up rotation. However, this zone also included the 50-week and 21-week moving averages, as well as the weekly VWAP measure.”
According to Kenwell, given how many measures were in this area, it would have been easy for bitcoin to pull back - especially with that nice streak of daily gains.
“Now pushing higher, I want to see how it handles channel resistance and the 200-day moving average,” noted. “If it can clear these measures, it puts $50,000 in play, followed by the 50% and 61.8% retracements, respectively.”
On the downside, bulls would love to see the $45,400 to $45,900 area hold as support, along with the 10-day moving average. Below that and the 50-day MA could be in play, Kenwell says.
As for dogecoin, it could have some more upside provided that it can get through the 15-cent level. “If it can do that, dogecoin could push up to the February high near 17.3 cents,” Kenwell added.
While these appear to be small moves, a rally from 15 cents to 20 cents would represent a gain of 33%.
“If dogecoin needs to pull back — as it’s up in seven of the past eight sessions — let’s see if the 10-day and 50-day moving averages are supported,” Kenwell said.
What’s Meta planning with Crypto?
Meta (MVRS) - Get Meta Report is starting to flex its muscles in the cryptocurrency arena.
That after the company filed eight crypto-related trademark applications that cover crypto exchanges, wallets, tokens and much more. In fact, six of the eight applications are crypto and blockchain focused.
The move comes months after Meta abandoned its quest to launch its own coin and amid the company's continued efforts to rebrand with its metaverse efforts.
Ross Mac of Maconomics broke down what the trademarks could say about Meta's future cryptocurrency ambitions in the latest episode of the Crypto Minute on TheStreet.
“After the South by Southwest announcement of NFTs coming to IG, it seems Mark Zuckerberg is continuing to try and dominate the crypto space,” Mac noted. “Now, Meta is now joining other companies like the New York Stock Exchange in filing trademark applications for the metaverse..”
According to Mac, what’s notable about the news is that it comes months after Meta exited its pursuit of its own coin called Diem, formerly known as Libra.
“But does the Meta rebrand and its focus on the metaverse make it OK for them to launch a new token,” he asked? “And if so, are you buying?”
How Bitcoin Differs From Ethereum
Last week, TheStreet’s Rob Lenihan interviewed Egor Volotkovich, executive director of cross-chain solutions EVODeFi on the similarities and differences between bitcoin and ethereum.
For investors new to crypto, it’s a discussion worth following.
“Bitcoin is the most popular cryptocurrency, while ethereum is a global computing platform powered by its native cryptocurrency, ether, which is the second most popular,” Lenihan explained. “Yet both are decentralized, meaning that they are not issued or regulated by a central bank or other authority.
Volotkovich pointed out the two cryptocurrencies "occupy different positions in the crypto ecosystem with marked uniqueness to both."
"While bitcoin continues to maintain its stance as the legacy payment asset in the blockchain world," he said, "ethereum has advanced in its reach as a decentralized finance fuel in the growing blockchain world."
In terms of advantages, Volotkovich said that bitcoin has maintained a high level of dominance in relation to its security infrastructure as the blockchain was not built in such a way that it can easily be exploited.
Ethereum, on the other hand, houses a number of decentralized applications, or dApps, he said, "some of which have been hacked, breached, or exploited in one way or the other."
Volotkovich said that a more apparent advantage on the investing scene is the cheap price of ethereum when compared to that of Bitcoin.
"Literally, investors believe the former has more penchant for growth than the latter," he said.
An obvious minus for ethereum is its high congestion level which has continued to cause high transaction fees dubbed gas fees. “Bitcoin’s observable minus in relation to that of ethereum is its average transaction time which is pegged at an average of 10 minutes as against that of ETH at a few seconds," Volotkovich said
He added that generally, institutional investors prefer to have their allocations in bitcoin much more than ethereum.
From Tesla (TSLA) - Get Tesla Inc Report to MicroStrategy (MSTR) - Get MicroStrategy Incorporated Class A Report and even Jack Dorsey’s Block Inc (SQ) - Get Block Inc Class A Report have all made allocations in BTC but not ETH, Volotkovich said
"However, retail investors and the broader DeFi world have found a lot of utility in ethereum and as such, it comes off as their go-to digital asset," he said.
Big Bitcoin Loan in the Pipeline
After a rough start to 2022, crypto investors are seeing some relief in late March, as bitcoin has resumed its march forward. The price of the top crypto in terms of market value could cross $50,000 in the coming days, according to experts. Bitcoin is currently trading at $47,351.57, according to CoinGecko.
Now more investment firms are angling to grab more bitcoin, using sizable loans to get the job done.
Case in point. MacroStrategy, a subsidiary of MicroStrategy, has just obtained a $205 million term loan collateralized by bitcoin from Silvergate Bank, a subsidiary of Silvergate Capital Corporation (SI) - Get Silvergate Capital Corp. Class A Report , the leading provider of innovative financial infrastructure solutions and services for the growing digital currency industry.
The loan was collateralized at closing by bitcoin with a value of approximately $820 million placed in a collateral account with a custodian mutually authorized by the lender and the borrower, according to a SEC filing from MicroStrategy.
"Under the terms of the agreement, MacroStrategy will use the loan proceeds to purchase bitcoins, to pay fees, interest, and expenses related to the loan transaction, or for MacroStrategy’s or MicroStrategy’s general corporate purposes," the two companies said in a press release.
This "loan gives us an opportunity to further our position as the leading public company investor in bitcoin,” said Michael Saylor, chairman and chief executive officer of MicroStrategy. “Using the capital from the loan, we’ve effectively turned our bitcoin into productive collateral, which allows us to further execute against our business strategy.”
New investments in bitcoin could indeed pay off for MicroStrategy, TheStreet’s Luc Olinga reported this week.
“Bitcoin seems to be showing good momentum, which could allow it to reach the record level of $69,000 crossed on November 10th,” Olinga said. “Some uncertainties have been removed, particularly in terms of regulation, even if the hardest part remains to be done in this regard in the United States.”
According to Olinga, the Russian invasion of Ukraine has shown other uses of crypto, helping to drive its adoption. And large investors, such as once-wary hedge funds, seem to be getting a bit more crypto-friendly.
“Additionally, the reduction in fears of a global recession also encourages investors to buy so-called risk assets to which bitcoin belongs due to its high volatility,” Olinga noted.
