Digital Natural Selection
Just as the recent slide in crypto and tech stocks has put pressure on investors, it is also testing the business models of tech businesses across the board.
When the system is flush with cash it’s much easier for entrepreneurs and investors to test ideas, but when the money starts tightening up, market prices fall, and business models start getting tested.
On Monday evening, the main team responsible for developing Ethereum Classic (a spinoff of Ethereum) announced that they will be closing operations. This follows announcements from the crypto social site Steemit and the adult entertainment site Spankchain that they will be laying off a large portion of their staff.
For the FAANG stocks, the recent tech rout is currently putting pressure on Wall Street’s perennial darlings to start delivering on great expectations.
Fear not though. This new age version of Darwin’s ‘survival of the fittest’ theory is a natural part of economic cycles and development and can actually provide great opportunities for those brave enough to take a contrarian view.
In fact, if we look past the specific examples above and consider the overall data, we can notice that job growth (which is considered a leading indicator of market health) in both the tech sector and the crypto industry are rising at a rapid pace.
This is something we discussed in a bit more detail in yesterday’s webcast for eToro Platinum and Professional clients. Feel free to catch the recording at this link.
eToro, Senior Market Analyst
- Closed for Bush
- Sudden Stock Plunge
- Crypto Air BNB
Please note: All data, figures & graphs are valid as of December 5th. All trading carries risk. Only risk capital you can afford to lose.
Today many financial markets will be closed to honor the passing of former US President George Bush Senior. As this was a rather last minute decision, we’ve added the following update to our market hours page. However, be aware that other assets could be affected due to lack of liquidity.
This unforeseen closure also seemed to have an impact on the stock markets yesterday as some investors may have been trying to reduce exposure before the hiatus.
Still, there’s no way to know for sure whether these losses were down to the Bush-related downtime ahead or for different reasons. Other catalysts like the trade war and yield curve inversion were also blamed for the sudden plunge yesterday (purple circle), which saw the major US indices down more than 3% by the end of the session.
Of course, we know that no specific catalyst is required here. Taking a broader view, as we’ve been discussing in these updates, sentiment across the markets is that many of these stocks have seen a record-setting bull run and might now be due for a pullback.
Crypto Air BNB
Despite the selling pressure lately, one particular crypto asset has been bucking the trend. While many coins are down double digits in the last week. Binance Coin (BNB) has actually risen by more than 20%.
This is likely due to two positive updates that come out lately.
On the development, side CEO CZ has recently announced that it will be launching their own public blockchain called Binance Chain.
On the adoption side, a blockchain based hotel booking site with over 450,000 listings is now allowing users to pay directly with BNB coins.
This is a particularly interesting update because of the status of BNB coin in general. In our recent research paper on Binance Coin, we noted that BNB is considered a utility token but that it may contain elements of a digital security. The sudden use case as a means of payment in sites other than Binance means that this unique asset may also be considered a cryptocurrency as well.
Feel free to review the full report at this link, to get a better understanding of what this could mean going forward.
Let’s have an amazing day ahead!!
This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.
eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.
Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.
Senior Market Analyst
Connect with me on….