Tag: S&P500

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crypto technology

Spotlight 9: January party month in tech, except for Tesla

January was great for tech companies and the S&P 500, but not for Tesla

It's confusing, but January saw thousands of people laid off at tech companies who were simultaneously hiring others. At Google and Microsoft, "net" thousands of people went out and as a result (or in spite of it?) both companies rose to record highs. Might make sense, but feels weird.

Leaving aside Tesla, where growth is stagnant, virtually all major publicly traded companies are rewarded for optimism about the growth of the global economy. A Gaza humanitarian tragedy is taking place in the Middle East, but it seems to be taking place in a parallel universe outside of economic reality. When Houthis -who knew this club a month ago- attack a few boats it has a greater impact on the stock market, than great human suffering. Again, perhaps logical, but it is still distressing.

Tech has been in a bit of the doldrums the last few years, after smartphone-induced growth slowed and it was a matter of wait and see to figure out which new trend would kick start a new hype cycle. That new hype has clearly been found in AI. The question is why did the two exponents of blockchain, Bitcoin and Ethereum, fall in January when there is so much optimism about the economy and the new tech wave?

The answer is simple: blockchain is usually slightly ahead of the "traditional" tech economy, and Bitcoin and Ethereum already posted huge increases in 2023. Compared to a year ago, Bitcoin rose 84% and Ethereum 45%. The adoption of the first Bitcoin ETFs thus became an old-fashioned "buy the rumour, sell the news" scenario that even led to fears of another violent price correction for crypto.

Billions have been invested in new applications, many of which will come to market as early as this year. We are often going to talk about multimodal AI (roughly speaking AI that knows and recognizes more forms than just text) and in blockchain, the hype projects have mostly been washed away and serious applications are becoming available. Will Apple run into regulatory and Chinese market problems and NVIDIA become one of the three most valuable companies in the world? Everything points to 2024 being a fascinating year.

Categories
crypto

Bitcoin, Ethereum, the stock market and the war

There is a tremendous amount of talk about the value of crypto compared to stock prices and especially since the beginning of the Russian invasion of Ukraine on Feb. 24, three weeks ago today. So I did a comparison of how Bitcoin and Ethereum are doing compared to the S&P 500, and the results are quite surprising.

As the starting date of comparing the two benchmarks of crypto, Bitcoin and Ethereum, with the most widely used gauge of stock markets, the S&P 500, I took the date of Ethereum's IPO on Kraken, Aug. 7, 2015. Completely arbitrary, of course, but I could hardly take a date from before Ethereum existed. To avoid making too long a row, I went on to look at the prices on Jan. 1 of this year, then Feb. 24, which was the day of the invasion three weeks ago, and today's position.

I understand that it is debatable to compare an index of 500 largest stock market funds to two cryptocurrencies. But the S&P 500 constitutes about 70% to 80% of the market value of U.S. exchanges. Bitcoin and Ethereum together represent over 60% of the entire crypto market of nearly $2,000 billion. Hence the choice of Bitcoin, Ethereum and the S&P 500.

First, let's look at Bitcoin:

Bitcoin:

  • August 7, 2015: $276
  • January 1, 2022: $47686
  • February 24, 2022: $35000
  • March 17, 2022: $41000
  • Percent increase between Aug. 7, 2015 and today: 14755%

Anyone who bought Bitcoin for $100 on August 7, 2015, had received 0.36 Bitcoin for it, and those are worth nearly $15,000 today. In short, 150 times your deposit back on every dollar.

Since January 1, Bitcoin has fallen 14%; the day of the humanitarian peace mission, cough, the drop was a whopping 26% compared to the first day of this year, but since then Bitcoin has risen 13% again.  

The second crypto to watch is Ethereum.

Ethereum:

  • Aug. 7, 2015: $2.77
  • January 1, 2022: $3683
  • February 24, 2022: $2336
  • March 17, 2022: $ 2820
  • Percent increase between Aug. 7, 2015 and today: 101705%

Anyone who bought Ethereum for $100 on August 7, 2015 had received over 36 ETH for it, and those are worth over $100,000 today ($101080 to be exact). In short, that's over two thousand times your deposit back on each dollar.

Since Jan. 1, Ethereum has fallen 23%, but has rebounded 13% since the start of the war.  

Finally, we look at the main gauge of stock prices, the Standard & Poor's 500.

S&P 500:

  • Aug 7, 2015: 2000 points
  • Jan. 3, 2022: (because Jan. 1 fell on a Saturday, U.S. stock markets did not open until Monday, Jan. 3, those slackers): 4796 points
  • February 24, 2022: 4225 points
  • March 17, 2022: 4357 points
  • Percent increase between Aug. 7, 2015 and today: 119%

Since Jan. 1, the S&P 500 is down only 9% (compare that to Bitcoin and Ethereum) yet up 3% since the start of the war.  

Conclusions:

  • *opendoor alert* over the long term, think at least 5 years, Bitcoin and Ethereum have proven to be much better investments than traditional stocks - despite all the huge declines in between
  • this calendar year, the S&P 500 remains strong, compared to a 14% decline in Bitcoin and a chilling -23%decline in Ethereum
  • since the start of the war, crypto has risen more than the S&P 500, but 13% rise for cryptos against 3% rise for the S&P 500 is not particularly spectacular
  • the myth that crypto is immune to "normal" economic influences such as interest rate increases, war and rising energy prices has been punctured.

And this despite all the rumors that wealthy Russians have been stepping into crypto en masse in recent weeks, with all the assets they did manage to liquidate.

sources: Coinmarketcap, Google Finance and Yahoo Finance.