Historically, Septembers have been bearish in most markets. On this occasion, the constant precautions around Covid-19 continue to wreak havoc. On the other hand, we have mixed signals in the macroeconomic field. Uncertainty generates volatility. Investors are very nervous and waiting. We well know that any change in monetary and fiscal policy in the United States and Europe will have repercussions. The next meeting of the Fed is next week. What will the announcements be? Well, we have to wait.
The Delta variant of the Coronavirus, the logistics crisis and concerns about inflation remain present in an extremely mixed and complicated environment. The technology sector, in particular, has been affected. Investors undoubtedly need more clarity. We hope that we will find that clarity in the month of October.
Meanwhile in the crypto environment, Bitcoin, despite a (relative) recovery from its last big drop, is still struggling below the $ 50K barrier. This resistance has proven to be quite strong. Despite the fact that we have overcome it on several occasions, we have not been able to break it definitively. Many retailers are distracted speculating on the hottest projects in the altcoin sector. We still lack conviction to hit a new all-time high in Bitcoin.
Now, let’s talk about the most popular crypto news this week.
To be fair, it is not very difficult to predict that a particularly volatile asset will fall after a big rally. After the euphoria, comes the fall. What commonly happens is that investors fall in love very easily and idealize their investment. The most naive speculators, out of greed, assume that if something goes up, it will go up forever. Error. The higher an asset goes up, the greater its risk. The very deluded are the first to suffer losses, because they buy at very high prices. This is the emotional investor who buys with irrational faith. In the world of finance, it is extremely helpful to be a skeptic.
Altcoins are riskier than Bitcoin because of a liquidity issue. If a coin goes up a lot in price, it is usually a low liquidity issue. However, that, too often, is interpreted, in this ecosystem, as a resounding sign of success. We can read in the specialized press headlines like these: “X currency surpasses Bitcoin in recent months”. Now, in a market as speculative as this, price seems to be the only thing that really matters. The value of stability is constantly underestimated. A small project, regardless of its merits, can be duplicated in a matter of days due to speculation. But it cannot sustain its price for long. Money usually leaves the same way it arrived.
Time passes and Bitcoin has done nothing but grow steadily. Bitcoin is rich in fundamentals: Longevity, community, reputation, infrastructure, etc. It is still the dominant cryptocurrency. And its investors have increased in number and quality. While it is true that it is no longer the only project in the ecosystem, it is definitely the most consolidated.
The altcoin fever certainly exists. But it is a phenomenon that affects the most speculative sectors. Now everything seems to revolve around altcoins because the most speculative retailers are extremely active on social media. In other words, the most coveted speculators are overrepresented in the networks. That does not imply that Bitcoin is losing ground. What is happening is a community level configuration change. In other words, Bitcoin is becoming the cryptocurrency of big money and smart money.
Over time and size, Bitcoin has gained stability. Of course we are talking about relative stability. Of course it is still quite a volatile asset. However, it is not as volatile as before. This means two things. First, it has become a safer (less risky) asset. And secondly, it is becoming a more boring asset. I mean performance. In other words, it is highly unlikely that Bitcoin will see increases of 1000X or more in the next few years. Why? Because Bitcoin is getting more and more liquid.
Markets tend to focus on a few players. Exchanges are vital to this system. And the “quality” of these exchanges is extremely important: Security, transparency, regulation, etc. Interestingly, Binance is not on the list for a regulatory issue, but let’s hope the situation becomes temporary.
I prefer to talk about the wallets that charge $ 6 to send $ 10. Who are we kidding? Commissions are extremely expensive. Obviously we have no problems with large amounts. The problem lies in the small amounts. We can’t cover the sun with a finger like headlines like this. Anyone reads this and thinks that the crypto space is commission free. No, that is not the case. In many, many cases, the commissions are excessive.
Development and fundamentals are very important. But we cannot underestimate the role of speculation and promotion. Prices go up, but not everything is thanks to fundamentals. A percentage, yes. But not the whole. The vast majority of the increases that we are enjoying in the stock market and in the crypto market are due to the liquidity injected by the FED. We cannot fall for illusions. This financial boom is essentially artificial. This is a rain of money.
Cryptocurrencies have benefited greatly from this. And projects that attract more investor attention will get the best returns. As simple as that. For fundamentals, promotion, or speculation, things go up in price when money comes in. Interest is the key to hitting new all-time highs.