When the coronavirus situation started, the stock market plummeted. Worldwide lockdowns began and the economy subsequently tanked. Crypto however, has been increasing ever since and recently the stock market has made enormous gains again. With the economy in dire straits, how is this possible? Is this actually good for Bitcoin, not a meme this time?
The stock market has changed forever
With new investing apps like WeBull and Robinhood, investing in any stock has been opened up to every person with a smartphone. Not only that but these platforms allow you to do fractional shares, which means when the price of a stock is $1000, you don't need to spend $1000 to acquire the stock, you can acquire a fraction of it, as much or as little as you want. This ease of access has fundamentally changed the market.
What we see now is that with average people investing their money on a grand scale in any stock they wish, is that people are actually investing in "memes". That might be a bit tongue in cheek but I believe it is quite accurate. Look at Tesla this year. Elon Musk has a strong cult following and has been big on memeing lately and this is a significant reason that Tesla has gone up way passed what any normal valuation in investing would value it at. This is because the average person is investing now with their smartphone and they are investing in stuff they know and people they know, like Elon Musk.
With this ease of access and this new era of investing we've seen the stock market explode, even during an economic meltdown that is actually even worse than the Great Depression. Hertz files for bankruptcy and their stock skyrockets. It is the age of meme investing driven by amateur investors. However, if the economy is worse than the Great Depression, how are people able to afford to buy stocks?
US dollar inflation
The federal reserve has been printing dollars to try and stimulate the economy and prevent a financial collapse. In fact, they have printed more money in one month than in two centuries. That is an absurd amount of extra money that is entering the economy. Much of this money is in the form of stimulus checks to the average person that has a certain salary or less that allows them to qualify. Where is all of this extra money going? Well, much of it is entering the stock market. This explains how the economy can be in a meltdown, while the stock market is at all time highs and some stocks are going through the roof way past what any normal institutional investor deems reasonable.
Cryptocurrency bull signs are being painted
Now, how does all of this relate to cryptocurrencies? Well, here's the thing. While a lot of this money is going into the stock market from retail investors, the vast majority of people are under no illusion that the economy is in dire straits and that the stock market is wildly overextended right now. Most people are aware that there is a collapse that is imminent, however they are still willing to throw this money into the market in the hopes of "timing the market" and getting some of the gains before it drops.
This all however, could not have come at better timing for cryptocurrencies. Cryptocurrencies have just been through a near 3 year bear market from extreme highs. They have gone through the bear cycle and have been experiencing a resurgence in recent months. This means that the cryptocurrency market is prime for investors, new and old, to come back into the game and buy in. Not only that, the market is more mature than it was years ago, exchanges can take higher volumes, they have better systems and quicker KYC processes in place to onboard new users quickly. All of this means that in this new meme based investing economy, a storm is brewing for cryptocurrencies.
The perfect storm
Faith in the stock market is very wary right now. The US federal reserve is printing more money in one month than it has printed in two centuries. People are losing faith in fiat currency on a mass scale due to this inflation. This is why gold is increasing and stocks are too. People want to use their stimulus checks to save themselves from inflation and to make money. However, with the waning faith in the stock market, they will look to other opportunities that are separated from the stock market, such as gold and well, cryptocurrencies.
Timing is everything for this perfect storm to happen. Bitcoin growing in value as well as the rest of the cryptocurrency market will garner mass media attention. If the timing of this is right, when stimulus check money is being printed and given to the average American, guess what will be on their mind to do with their "free money"? Certainly, if cryptocurrency attention is high at the time, it will be on people's mind. Some people will invest their stimulus checks into crypto, driving the price up, which garners more media attention and spreads the meme that "crypto is a safe haven against the falling economy and US dollar", which leads to more people jumping on the bandwagon, institutional and retail. The spike in profits in the crypto market could be more extreme than anything we've ever seen before.
I believe the chance of this occurring is highly likely, given the current situation. As long as the market continues to slowly grow and garner more and more media attention over the coming months, while more and more money is printed into the economy and the lockdowns continue, it only gets better for crypto and the people invested in it.
The question is are you willing to take the leap of faith before the market starts going up to maximise your profit in the oncoming stimulus check pumps?
If you are, check out my definitive guide on buying cryptocurrencies to get started.