Cryptocurrency markets saw their second consecutive week of adding double digits to total market capitalization. Crypto markets continued to be highly correlated to traditional markets. As investor sentiment eased a bit on wall street, most digital assets in the top 20 saw positive momentum.
Altcoins Have Stronger Week Than Bitcoin
Despite Bitcoin price growing nearly +7% the this week, a handful of altcoins saw double digit returns. The chart below shows some of the top performers. Tezos continues to be one of the best performing digital assets, surging another +30% the last 7 days. On a macro scale, Tezos has grown nearly +130% the last 1 year – which puts it at the best performer among the largest cryptocurrencies.
More investors seem to be piling into Tezos since it’s Q2 2020 report was released. The Q2 report showed $635 million in assets as of January 2020. Since Tezos’ original capital raise in 2017, its assets have grown nearly +170%. The fact that Tezos has been giving out numerous grants to new companies is also a sign of both positive health, and continued interest in building on the Tezos blockchain.
Since December of 2019, Bitcoin market dominance has continued to slowly decline. Towards the end of December, Bitcoins market dominance was nearly 69%. Most recently, the market dominance has sat around 63.5%. A large part of the reduction in market dominance can be related to correlation. Bitcoins price has been highly correlated to the stock market for months now. With correlations being tight, it’s given altcoins the opportunity to capture market share. We’ve already seen this with altcoins like Tezos, which has skyrocketed +140% the last year, compared to Bitcoin growing around +40%.
Domestic and Global markets were down slightly last week as oil markets created all sorts of volatility. May WTI oil futures fell into negative territories as storage space has dried up for oil. With excessive supply of oil due to Coronavirus shutting down society, oil prices went negative and were at $-37 on Monday. This marked the first time in history that oil prices went negative.
As oil prices corrected throughout the week, the market was able to correct as well, but ended the week down slightly.
Traditional markets have rallied +25% the last month recovering from early damage that Coronavirus caused on a global basis. With unemployment claims hitting 26 million as of this week, it’s safe to say that investors are still riding the fed. In last week’s report, it was noted that $4+ trillion in relief had been injected by the fed. Investors are brushing aside the unemployment numbers and instead betting that the trillions in relief will help the economy quickly bounce back once all states open back up. Despite unemployment numbers looking much worse than the 2008 financial collapse, many argue that this type of relief we’re seeing now wasn’t present in 2008. This can be a justified argument, but investors also have to weigh the risks.
With small business funding drying up last week, the house rushed to pass an additional $484 billion this week in order to hopefully slow down unemployment and help hospitals. The stock market has held up exceptionally well, but investors also need to understand that these relief packages won’t last forever. Many argued that even the $484 billion that was injected this week wasn’t going to be enough. We now enter a stage where the Fed could start to be more cautious on aid. The reason for this is flu season. The Fed ultimately knows that if Coronavirus has a 2nd wave, it could be detrimental when paired with the flu. You could very well have a scenario where some states get hit extremely hard with both COVID19 and the flu ( the states that caught Coronavirus much later than the early victims.) If this were to happen, the Fed would need to be in the position to supply much more capital.
Some of the medical solutions we thought we had under control reared their ugly heads this week as well. The markets rallied after a report surfaced that Gilead Sciences could be a solution in the antiviral space. We then saw later in the week that data showed “remdesivir showed no benefit for Coronavirus patients.” In addition, president Trump was also pushing hydroxychloroquine which was a drug known to treat malaria. Despite the potential evidence the administration came across in terms of it treating COVID-19, reports said otherwise this week. According to reports, the drug was showing more deaths and no benefit.
Despite the market rebounding from initial lows, it could be a much longer road to recovery than many think. Small businesses are hanging on by a thread right now and it’s crucial that people get back to work. Some states are rushing to re-open, but it can either be the best decision in the world or the worst decision. It will be interesting to see how the next couple weeks go. The market is taking a big risk right now by believing that the lows are in. People are betting on the fact that everyone will be back to work soon and that businesses will be booming. Beneath the surface, many companies have no idea what their earnings are going to look like for the rest of 2020. With everything that is still going on, it still appears that the risks far outweigh the reward at the moment.
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