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traditional markets vs crypto markets

  • 04-04-2018 11:21am
    #1
    Registered Users Posts: 295 ✭✭ annie.t


    In my opinion stock markets are topping off. Anyone have any views as to how it affects crypto markets?
    My own view is crypto is leading traditional stocks market ie. we are in for major correction in stocks
    Anyone up for discussion?


Comments

  • Registered Users Posts: 14,609 ✭✭✭✭ banie01


    I have a fairly large(For me at least) investment portfolio.
    Mainly in ETFs with an additional exposure to infrastructure companies.
    When I initially started investing I was very much focused on research led decisions.
    I have @12 yrs experience managing my own portfolio and only in mid 2017 did I start hiving off into any serious type of crypto investment.
    My split is @70/30 Stocks vs Crypto.

    Stock markets are a known and regulated environment.
    As an example a listed company will be required to file accounts and reasonable assumptions can be drawn from these accounts particularly when compared to their competitors.
    A large volume of information is available for analysis and misinformation or false accounting is punishable.
    On top of that a layer of market control is in place that means a dramatic market shift in a stock price will likely lead to an investigation or even a suspension of trading.
    The publicly available information would be balanced against the sell patterns as a way of investigating both market manipulation and insider trading.
    Further to the above, there are clear and varied formulae for determining a stocks fair price, be it income, profitability, gearing or actual assets.

    Crypto has none of these.
    It is in my opinion an attractive market precisely because of the volatility.
    There is huge scope and in fairness evidence of market manipulation.
    There are ongoing insider trading rumours for nearly every coin aside from BTC and even that has been tainted by BCH.
    Large price shifts in crypto are driven by FUD and people not understanding the markets!
    A large proportion of people invested in crypto have irrational attachment to either the coin or to the figureheads promoting the coin and any counterpoint raised is shot down as FUD!
    Can you imagine FUD being used as an argument in a regulated stock market?
    Where companies are required to issue accounts and warnings?

    There is no inherent or intrinsic value in a crypto and aside from the fact both are trading on exchanges there is absolutely nothing analogous between crypto and stocks other than a lot of people have money invested in them that they hope will multiply!

    Crypto pricing has no rational basis and can't be assessed on a rational supply demand curve.
    The only basis for the price is continuing demand.
    The argument is often made that this is similar for other stores of wealth.
    It really doesn't stack up. The traditional stores of wealth, precious metals in particular are in fact commodity items needed in every advanced industry. Try to build electronic devices or advanced medical or industrial equipment without access to Gold, Platinum, Palladium and so on.
    Even if only cosmetic uses are considered, there are myriad alternative uses available for metals and gems that do not exist for crypto.

    The usual crypto argument is that versus FIAT it allows for a stable currency that restricts inflation as the amount in supply is limited.
    Similar to the supposed effect of the Roman coinage prior to the 2nd century AD debasement of the coinage.
    I would argue that forking of coins is akin to this debasement.
    Inflation will occur via relative value of the satoshi and imposed forks.

    Crypto's potential value in my opinion is in its potential to allow ease of transaction and growth of trade.
    It is as a means of exchange that I hope it will achieve success and long term value.
    But that potential is to a large extent going to be stymied by the HODLer mentality.
    A means of exchange that is not used for such and that is only held in the hope of gains will rapidly be superseded.
    I know a lot of people who hold crypto, who have never had a crypto transaction other than their initial investment.
    It defeats the entire purpose of the project.


  • Registered Users Posts: 14,609 ✭✭✭✭ banie01


    Just on the point of crypto markets leading Traditional markets.
    The entire crypto market Capitalisation was @$880bln and is currently at about 30% of that at @$264bln.
    The entire crypto market Capitalisation is exceeded by single corporations and the world market valuation itself is currently @$80trillion meaning crypto equates to @0.25% of the World stock market exposure.
    To make a link between Crypto leading traditional markets would need a significant amount of data to infer and even more to confirm.

    That said, I do think we are approaching a market correction.
    That correction may well lead to inflows to crypto as people chase gains, but I would be dubious of crypto leading an exodus from stocks for any other reason.

    Capital invested in companies generally stimulates economic growth, in spending on employment, deployment and marketing of goods and services.
    I have yet to see an argument that capital invested in crypto has any such effect.


  • Moderators, Category Moderators, Motoring & Transport Moderators, Regional East Moderators Posts: 59,698 CMod ✭✭✭✭ unkel


    banie01 wrote: »
    The entire crypto market Capitalisation was @$880bln and is currently at about 30% of that at @$264bln.

    To put it in another context. The entire crypto market is worth a third of what Apple is worth.

    "Wind is Ireland's oil" - An Taoiseach, 25/05/2022



  • Registered Users Posts: 14,609 ✭✭✭✭ banie01


    unkel wrote: »
    To put it in another context. The entire crypto market is worth a third of what Apple is worth.

    Dammit I thought I'd made that point without naming the Evil Fruit :pac::pac::pac:
    The entire crypto market Capitalisation is exceeded by single corporations

    But yep, there are many corporations who's cap is a multiple of the current crypto market.


  • Registered Users Posts: 295 ✭✭ annie.t


    banie01 wrote: »
    Just on the point of crypto markets leading Traditional markets

    Sorry I wasn't clear in my post. What i meant was correction in crypto market was ahead of correction of stocks market. i read that opinion on twitter and was curious as what you guys think.
    From what i can gather we are in for major collapse of the stocks markets worldwide (my personal opinion). Just wondering how it will affect crypto.
    Surely we will see escape of the money at first at least as hardly anyone wants to invest in such a volatile market at such times.


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  • Registered Users Posts: 14,609 ✭✭✭✭ banie01


    annie.t wrote: »
    Sorry I wasn't clear in my post. What i meant was correction in crypto market was ahead of correction of stocks market. i read that opinion on twitter and was curious as what you guys think.
    From what i can gather we are in for major collapse of the stocks markets worldwide (my personal opinion). Just wondering how it will affect crypto.
    Surely we will see escape of the capital at first at least as hardly anyone wants to invest in such a volatile market at such times.

    In so far as a traditional market correction is becoming more and more likely,, considering crypto an indicator is a tricky proposition.
    The traditional indicator of a flight from the market is a growth in safe haven investments.
    Traditionally those are Precious Metals, Government Bonds or Blue chips.
    If the conventional crypto argument that BTC in particular is becoming a store of wealth holds credence, one would expect to see price growth in Crypto as a leading indicator of a flight from the market and it is far from a safe haven.

    Taking that as an indicator, the crypto markets current performance seems to signal a continuing bull market as any capital gaims in the last 5 months have fled the market and prices are back to October levels.

    If we ignore the Stock market completely and only take account of the capitalisation of Government Bonds.
    Bonds are used as a safe haven when market returns decline below the inflation level.
    A rated bonds would be expected to trade between 2-3% yield versus an expected 7% yield in a performing market.
    The bond yields will drop as demand increases for safe haven, that is a much more likely indicator of flight from the markets.
    Growth in precious metal prices and drops in yield on the markets are always indicators of note.

    The market cap of the Bond market is @$83trillion, even at its peak the crypto market doesn't carry enough cash to make a dent in global conditions at present.
    Total Stocks are @$80trn Government Bonds are @$83trn.
    Thats $163trn without including Energy markets, Precious Metals or Commodities.
    The crypto market could disappear overnight and it would not cause systemic damage.
    Against the Stock and Bond markets, even peak crypto was less than 0.7% of total market cap.

    Leading market indicators for Economic and market growth I would pay attention to are inventory levels, building permits, energy and commodity futures and any sentiment surveys I could lay hands on.
    By the time anyone who is withdrawing capital from Stock to invest in crypto, the correction has happened and the investor is chasing alpha.

    There is a need for many crypto investors to see the recent drops as indicative of a coming overall market dip.
    It is part of justifying the HODL strategy, as if theres no dip and recovery why HODL at all?
    Why not use cryptos as a currency rather than a speculative wealth store?

    Yes the dip will come but that is because the current stock market has been on a near 10yr bull run and consolidation and correction are overdue.
    Particularly with regard to market exposure of the US economy to Asian Bondholders and factor of inflationary growth versus actual value growth. The US is gearing for a trade war that will have far more market impact than any crypto move.

    Look long story short is I hold crypto and I hold stocks.
    I have yet to see a cogent argument that would lead me to believe that the current crypto market is in any way an indicator of total market performance.


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