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Crypto Update: Ethereum Flirts With $700 as Choppy Consolidation Continues

There are still a few more days left to nominate April as National Cryptocurrency Appreciation month.  It has my vote and I have lots of company. Let’s start a petition.

Whoever holds to the belief that cryptocurrencies do NOT represent a store of value hasn’t looked at reality recently.  With the stock market at the highest multiple of earnings in history, please help me understand why stocks are such a great store of value.  With the 10-Year US Treasury Note destine to break 3%, bond prices are already showing more volatility than anytime in the last decade.

This mornings big CNBC headline was “Time to ditch growth stocks for value stocks, portfolio manager says” .  That portfolio manager was Chad Morganlander with Washington Crossing Advisors.  Here are his three key points: 1.) Stock valuations are stretched. 2.) Outsized gains in the technology sector. 3.) Greater value offered in financials, healthcare and energy.

Revealing Reader Surveys

An ongoing CNBC reader opinion poll shows lots of investors agree with Morganlander.  At the time of this writing, 61% voted for value investing while just 39% were stuck in growth mode.

At the very same time, a separate CNBC opinion poll following a very positive Bitcoin story titled, “The man who called the bitcoin bottom now sees this”  The man being referenced was Bill Baruch of Blue Line Futures where he happens to be President.  From its April 5th low around 6700, BTC has gained 37%.

During that same period, the Nasdaq has increase 4.4% but with greater volatility than many cryptocurrencies.  

A Conservative Technical Call

Baruch makes technical calls and points to 10,000 as an important resistance level. If and when Bitcoin prices break through this, he predicts $11,500.  This is not some hyperbolic prediction. It represents about 25% above present levels. Nobody living in an area where cannabis is still illegal is predicting anything similar for either stocks or bonds.

In spite of this evidence, many investors remained unconvinced. A reader poll at the conclusion of the Baruch article shows that about 59% of respondents would not buy bitcoin.

Missing The Message

With no disrespect toward CNBC, their limited focus on bitcoin misses the message. Cryptos have been ruled securities by the IRS and the SEC is dealing with them in much the same way. As securities, they offer better value than stocks in general.

In keeping with the Chad Morganlander analysis, crypto prices offer a better value than many technology stocks while fitting well with his preference for financials.

A Monolithic Message

Why is it that when reference is made to cryptocurrencies, bitcoin becomes synonymous with at least a dozen other coins and a bazillion tokens?  In the CNBC Bitcoin survey, 59% voted against owning bitcoin. Had there been names like ICON , Vertcoin or Oxproject included in the survey, the negative response rate would have been closer to 100%.

The point to be made here is while CNBC and others focus solely on bitcoin, it is only one of many that deserve attention.  Bitcoin may represent relative value but so far it has been one of the weaker performing currencies.

As we pointed out in a recent tabulation, bitcoin has gained roundly 37% during the month of April.  During the same period, a list of the top 15 so called Gen III names increased at a pace three times faster than bitcoin.  

Many of these Gen III names are still well below their December/January high levels suggesting that, while bitcoin may get all the attention, investors in so called altcoins are finding all the value. Finally, the small investor is the winner.

What Will Stop The Train

Right now better value is available in crypto than conventional asset classes.  That statement also applies to things like real estate. A reasonable, yet cynical point of view is that the price of crypto is aided by a strong underlying level of investor confidence fed by a decade long bull market in stocks and a 30 year long bond market boom.  If another financial event like 2008 were to occur, all bets are off.

What appears more likely is that an inflated stock market will deliver below historic average returns while a reasonably strong US economy will grow into the already high stock market valuations.  This would be sweet music to crypto investors that found value in April. This month the individual investor beat the giant institutional investor; congratulations.

Featured image courtesy of Shutterstock. 

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