After weeks of trading sideways, Bitcoin and Ethereum are showing renewed strength and a surge in upward momentum, taking the market in a perfect storm yet again.
Bitcoin has experienced a significant price reversal over the past several weeks, rising from below $30,000 to over $46,000 in value on august the 11th.
BTC gained almost 19% in the past week making it its strongest monthly performance since March closely followed by 18.5% in July. Meanwhile, Ethereum (ETH) is trading around $3,100, having posted a gain of 11.5%last month, its largest increase in three months. As Ethereum's rally accelerates and bitcoin's advances have slowed, some on the institutional side speculate it could overtake Bitcoin as the world's largest cryptocurrency by value.
Clearly, the crypto bulls do not go on holiday.
The world's total cryptocurrency market capitalization peaked at over $2 trillion Wednesday afternoon for the first time in about three months.
Over the last year, there has been an increase in investment appetite for cryptocurrencies due to crypto trading volume growth, fintech company crypto offerings allowing you to acquire crypto with a click from your phone.
AJ Bell's research suggests that more adults in the United Kingdom invested in crypto than stocks in the last year: 7% of the population versus 5%for stocks. Data show that 71% of these investors said that they made a profit from their investments, while only 12% admitted losing money.
Retail clients aren't the only ones interested in the recent cryptocurrency mania. Institutions and hedge funds managers are also entering the game. It seems that the world's gone crypto crazy.
More institutions are also introducing cryptocurrency products for high-net-worth clients, including JP Morgan and Wells Fargo. A recent report by the AIMA in partnership with PWC report that 47% of traditional hedge fund managers surveyed representing $180billion in assets under management (AuM) are already investing or looking into investments in crypto. Benefit-wise, the median crypto hedge fund returned 128%in 2020 despite the COVID-19 pandemic which generated the economic downturn.
As a result of the lack of laws and regulations in place, some major financial institutions are reluctant to involve themselves. Some other traditional asset managers often shy away from cryptocurrency investing due to its volatile nature, lack of appropriate infrastructure, as well as the recentness of the industry. However, Increasing regulation and interest in the digital currency industry could force traditional institutions to hop in, either through buying a stake in cryptocurrencies or launching their own cryptocurrency-tracking funds.
The alternative assets class of cryptocurrencies is becoming a driving force in the market. The price discovery for these digital currencies is different from traditional investments because it cannot be correlated with traditional sources of values, such as stocks or bonds. In spite of this distinction, crypto may provide diversification opportunities and an additional source for portfolio returns that are otherwise unavailable as yields decrease and the stock exchange might be unpredictable given the current economical downturns.
Though excitement is high for rally markets, anyone who wants to put their money in cryptocurrencies needs to be knowledgeable about the result of trading as cryptocurrencies are notoriously volatile and that education and experience are the key