When the Grayscale Bitcoin Trust (GBTC:US) began trading, many investors made great paper profits from the premium that it carried in the early years. This knowledge enticed the same accredited and institutional investors, as well as others eagerly sitting on the sidelines, to jump into the Grayscale Ethereum Trust (ETHE:US). However, it is not the same because the fundamentals of Bitcoin and Ethereum are not the same. There is no one size fits all investment strategy that encompasses all cryptocurrencies.
The inordinate thirst of gain that had afflicted all ranks of society was not to be slaked even in the South Sea. Other schemes, of the most extravagant kind, were started. The share-lists were speedily filled up, and an enormous traffic carried on in shares, while, of course, every means were resorted to to raise them to an artificial value in the market. — Charles Mackay, 1841
Why are stocks rising amidst riots and COVID-19?
Because people aren’t spending.
John Maynard Keynes laid out in The General Theory of Employment, Interest and Money a simple equation that sums up the current situation:
We are not buying Bitcoin into the halving.
Bitcoin has rallied to over $10,000 from around $6,000 just a month ago, adding more than $1.4 billion in value. As of the release of this piece, Bitcoin is $8586. Bloomberg, CNBC, along with top technical analysts are covering the price action and attributing the surge to the upcoming halving and excitedly pulling up countdown clocks on their shows. The media is rampant with bull-run hype and moon shooting price targets.
There is hope and an expectation that lives will return to normal after the quarantines loosen and “non-essential” businesses are allowed to open in the US and globally. Market participants believe that a $2 trillion dollar aid package is enough to float small and large businesses, as well as the 20%+ who are now unemployed — not to mention freelancers who do not qualify for unemployment and many who are underemployed. In fact, the markets continue to rally on hope and news that the COVID-19 curve is flattening and a vaccine is close.
The Coronavirus Aid, Relief and Economic Security (CARES) act included a $349 billion loan program called the Paycheck Protection Program (PPP) as a lifeline for small businesses desperate for cash during the COVID-19 pandemic lockdown. We believe that a payroll tax holiday is a better solution to ensure that Small Medium Enterprises (SMEs) receive the economic support that they need.
The Fed is pumping $6 trillion dollars into the US economy, but will it trickle down to the recently jobless? The latest addition to Quantitative Easing Infinity (QE8) was the announcement that the bond purchase program has extended to junk bonds and collateralized loan obligations (CLOs) on Thursday. The benefit of this purchase program ultimately extends to the largest holders of CLOs, structured products holding junk bonds.
The Federal Reserve just added $4 trillion to its balance sheet, with many market participants and the general population bracing for inflation, including higher asset prices. This fear is from Monetarists’ thought, who believe that inflation was a direct result of the money supply; however, Keynes argued that prices, resulting from economic pressures, are more reflected in inflation.
Digital assets are poised to revolutionize the way people operate and exchange value in the world. Adoption of distributed ledger technology, which is the platform digital assets are built upon, has provided the infrastructure for this new asset-class to bring much-needed innovations to the world of finance and beyond.
In their simplest form, digital assets are units of value or ownership stored on a distributed ledger. Stock shares, equity, property, and nearly any other unit of value imaginable can be stored and represented on these ledgers. They also enable fractionalization, so you can own a small percentage of a larger item.
Based in Toronto, Montreal and New York, ExC&M is a global advisory and digital asset platform with broker dealer capabilities. ExC&M provides strategic advisory, capital raising (through our partnership with a FINRA registered broker dealer), research, and M&A as well as digital asset issuance and trading services.