Crypto investors who jumped on the bandwagon at the start of the pandemic are still doing better than those who bought into big tech companies at the same time
More than $200 billion was wiped out from the cryptocurrency market today alone as the value of digital currencies plummeted in the so-called ‘crypto winter’ fueling fears of a broader stock market crash.
Cryptocurrency is a form of digital money that uses mathematics to create a unique piece of code in which customers invest.
Bitcoin was the original digital currency that began in 2009 to bypass central banks, and an increasing number of sub-coins have been established in recent years.
Elon Musk-backed Dogecoin has outperformed top tech stocks like Amazon and Apple since March 2020 – despite massive drops in its value across the cryptocurrency markets in recent days.
A $100 investment in Dogecoin on March 23, 2020 will now return $956.67 – the same amount on Bitcoin purchased on the same date paying $446.60 today.
Tesla stock has fared better than most other tech companies and even Bitcoin, as the trend toward electric cars pushed a $100 investment in March 2020 to $845.06.
Investors who put money on Bitcoin and Dogecoin in April 2020 will be better off than those who invested in Big Tech stocks like Amazon, Meta and Apple
Despite this, Tesla is dropping rapidly with its early April 2022 price drop of $1,318.76 fast amid Elon Musk’s attempts to buy Twitter.
Shares in multinational giants like Apple had less success with a $100 investment in the tech company in March 2020, returning a more modest $261.18 today.
Meta, the owner of Facebook, is only up about 20 percent with the same $100 worth of shares that paid just $127.44 — despite hitting a yield of $153.85 as recently as March 30.
“Since the market plunge on March 23, 2020, Dogecoin may have surprisingly led the price performance, narrowly outperforming Tesla,” said Ben Lidler, global market analyst at EToro.
Meanwhile, bitcoin, the largest crypto asset in the market, has outperformed other major tech stocks despite their recent declines, outperforming the likes of Apple, Amazon and Meta.
The price of the token rose by nearly 4,000 percent in 2021, after Musk published a wave of memes promoting the joke coin.
Tesla CEO Elon Musk’s frequent tweets on Dogecoin, including one that he dubbed ‘people’s crypto’, have turned the once-obscure digital currency that started as a joke on social media, into a dream. speculator.
Ethereum, the world’s second largest cryptocurrency, has now lost more than half its value this year, Bitcoin has shed a third of its value since January, and Luna has 98 percent of its value overnight with suicide hotlines installed on the coin’s Reddit page. calendar.
Coinbase, the popular cryptocurrency exchange, has warned users to lose all their money if the company goes bankrupt – after the economic downturn sent its stock price down 27 percent.
Investors in traditional stocks are also hurting, with US technology stocks also falling in recent weeks including Amazon which is down 30 percent in one month.
Musk’s Tesla tumbled 36 percent last month amid news of the eccentric CEO’s attempts to buy Twitter.
The electric car manufacturer is now trading at $734 (£600), a significant drop from $1,145.45 (£937.69) a month ago.
The day after the iPod was turned off, a drop in Apple’s stock drove it off the top spot as the world’s most valuable company.
Oil giant Saudi Aramco was valued at $2.43 trillion (£1.99 trillion) and outperformed the tech company as Apple’s market valuation fell to $2.37 trillion (£1.94 trillion).
Apple stock is down from trading at $167.66 (£137.09) a month ago to $143.91 ($117.67) today.
During the pandemic, record low interest rates aimed at boosting economies have caused investors to buy riskier assets such as cryptocurrencies at higher rates of return.
As rising inflation causes interest rates to rise in order to protect savings, these assets are sold in favor of safer government bonds – which will provide better returns.
The Bank of England raised interest rates by 0.25 per cent to a 13-year high of 1 per cent on May 5.
The Federal Reserve also raised interest rates to 1 percent on May 4 – with further hikes expected to stave off the worst impact of inflation.
The Nasdaq stock exchange experienced its biggest one-day decline since June 2020 earlier this week, and the crypto hit points to a growing integration between the crypto and traditional markets.
The index, which includes several high-profile technology companies, ended trading on May 5 at $12,317.69 with shopping sites such as Etsy and eBay leading the decline.
The two companies saw their value fall 16.8 percent and 11.7 percent, respectively, after announcing lower-than-expected revenue estimates.
The FTSE 100 is down 2.5 per cent this morning after official figures showed the UK economy growing slower than expected in the first quarter – and heading in the opposite direction in the last month and 2 per cent, respectively.
Shares of once-flying tech companies have begun to fall dramatically in value in recent months — raising fears of a broader economic meltdown and making investors less likely to buy the assets.
The decline in these stocks is fueling fears that the “dotcom bubble burst” in the early 2000s may be about to repeat.
In the late 1990s, the increase in computer and Internet access led to widespread speculative trade in Internet companies.
This interest has resulted in companies with the ‘.com’ suffix being rated very highly.
After the US Federal Reserve raised interest rates after the end of the boom period in the 1990s, speculative trading plummeted and caused the internet bubble to burst, sending values down.
The volume of business that cryptocurrency exchanges do, which keep “blockchain” records of transactions, is already dropping dramatically.
Despite expectations, cryptocurrency traders on social media have taken to the platforms to mock the crash, encourage others not to sell and in some cases mourn their losses.
The subreddit r/terraluna was inundated with several investor posts pointing out their losses – with some saying they could lose their homes or might even lose their savings alive.
Even the administrators of an online investment group had to put suicide hotlines at the top of the investor forum.
The acronym “HODL” – Hold On for Dear Life – has been used in many of these memes after gaining popularity in earlier incidents where traders bet their investments on coins leading to a recovery.
The crypto sale was driven by a grueling macro backdrop of high inflation and interest rates sending shockwaves through the tech sector, dragging cryptocurrencies down with it, confirming that bitcoin and others serve no purpose as an inflation hedge, Victoria said Scholar, Head of Investments at Interactive Investors.
Cryptocurrency Luna lost its peg to the dollar this week, dropping below $1 per coin, causing prices to drop dramatically as the industry panicked (similar to a bank run).
The coin, also called Terra, lost 98 percent of its value overnight.
“The Terra incident is causing panic in the industry, as Terra is the third largest stablecoin in the world,” said Ipek Ozkardskaya, chief analyst at Swissquote Bank.
But TerraUSD “has not been able to deliver on its promise to maintain a stable value in US dollar terms.”
The cryptocurrency’s decline has wiped out more than $1.5 trillion in value from the markets, but investors are still hopeful that prices can recover as they did in the past.
However, unlike previous crashes, experts believe that this latest price drop may permanently be due to broader concerns about a global recession.
Bitcoin reached a high of $1,754.19 (£16,194.81) on December 17, 2017 before dropping below $11,000 (£9,000) just five days later – losing nearly 45 per cent of its peak.
The price recovered to pre-crash levels in November 2021.
The economic downturn has led Coinbase, an online trading platform, to issue a stark warning to customers: Your cryptocurrency is at risk if the exchange goes bankrupt.
The Popular Stock Exchange witnessed a 27 percent decline in its value as a result of the collapse.
According to the official Coinbase website, the company has more than 98 million approved users. It is the largest cryptocurrency exchange in the United States.
Coinbase CEO Brian Armstrong tried to calm contributors in a series of tweets, one of which read: “Your money is safe at Coinbase, just as it has always been.”
Despite Armstrong’s claims, the company referred to clients in a Securities and Exchange Commission filing as ‘unsecured creditors’ in case Coinbase gets confused.
This means that the customers’ crypto assets are considered the property of Coinbase by bankruptcy officials.
SEC filing, Personnel Accounting Bulletin 121, requires cryptocurrency exchanges to include client crypto holdings as assets and liabilities on their balance sheets.
Armstrong wrote on Twitter that the company was “not in danger of bankruptcy” despite the filing, which he said was done until the company complied with SEC regulations.