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.
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 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.