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Bitcoin Overtakes Major Altcoins, While the S&P Sets Record Highs

July 16, 2019
“Bitcoin will do to banks what email did to the postal industry”
― Rick Falkvinge

5-Day Change

  • Bitcoin $10,452.26
  • Ethereum $217.73
  • S&P 500 $3,013.57
  • Dow Jones $27,371.14

Top trading ideas:

Multi-Timeframe Analysis for BTC/USD + Trade Signals

 Bitcoin - Be Ready for Breakout above $14,000

 Bitcoin - Inverse Head and Shoulders Pattern + Trade Signals


Is It Really The End of Altcoins?

Nearly all of the top altcoins have lost money this month...and the culprit may be Bitcoin’s surging maturity. Bitcoin, regardless of corrections or daily volatility, has gained 16.23% month-over-month, while almost every altcoin is in the red. Ethereum and Ripple, the next biggest coins by market cap, lost 35.45% and 22.10% respectively. Even Litecoin, previously considered an altcoin outlier for its positive performance, has lost 29.96% in July alone.

Woah, that’s a lot of red ink! Yep, and the bad news for altcoins doesn’t stop there. Previously, altcoins typically followed Bitcoin’s performance, and you could easily see comparable trends in an altcoin and Bitcoin. Now, however, even if the broad trends are similar, altcoins are falling a lot faster and harder than Bitcoin. As for Bitcoin itself, it’s fallen 7.05% in July - mostly as a correction to the $13,000 spike last Wednesday.

Why are altcoins doing so poorly? One big theory assumes that, if Bitcoin is the main liquidity provider for exchanges trading altcoins, then it doesn’t make sense to trade Bitcoin for altcoins if the BTC price is rising. Another theory looks at the growing institutional support for Bitcoin in particular - altcoins, many experimental projects, lose out in quality compared to Bitcoin as investments fail to deliver. Long-term, Bitcoin still seems like a good bet, thanks to improving fundamentals, but altcoins - especially of the shitcoin variety - don’t have the same outlook.

What about Litecoin? LTC dodged the worst of the crypto winter and managed to actually gain value despite the bear market, giving it a reputation as an outlier. But it’s had a large fall from grace, even though it was chosen as the official crypto of the Miami Dolphins.It is now becoming clear that Litecoin is subject to the same pressures as other altcoins.

Wut We Think: The almost across-the-board loss for altcoins this month isn’t just a random market activity - it’s a sign that the fundamentals are changing. On the other hand, the biggest altcoins - Ethereum, Ripple, Litecoin, and others - have uses aside from pure speculation, like dApps and remittances. That means that falling prices are likely to undervalue the top altcoins, and set the stage for an inevitable appreciation once the current Bitcoin bull run cools down. This could represent a juicy opportunity for traders who like ‘being greedy when others are fearful’, to quote Warren Buffet.

Zoom left a critical bug unpatched for months

What’s a major security flaw between friends in the time of ransomware...Zoom executives are probably asking. Last Monday, a security analyst revealed a major security flaw in the popular video conferencing software on Mac platforms. This vulnerability stems from a web server Zoom installs on the Mac device that lacks the protection of modern browsers, potentially allowing attackers to launch denial-of-service and other attacks. 

Did they fix it? Zoom has a lot of corporate clients, who probably wouldn’t be too happy if a vulnerability like this was allowed to persist. Zoom did post a fairly comprehensive fix - but that doesn’t change the fact that the analyst who discovered the problem did so 3 months ago - and Zoom didn’t do anything about it until that analyst went public.

Was it really that bad? Yes! Cybersecurity is critically important, and having huge holes (like from an unsecured web server secretly running on your machine) is pretty much a gimmie for hackers. The Zoom bug also allowed attackers to remotely turn on your Mac’s webcam, which seems like a pretty big flaw for any software.

But what about the stock? Zoom can probably take a breath of relief because the news didn’t seem to affect the stock’s performance all that much. The price did fall by 2% during the next few days, but recovered and is currently trading 9.7% higher since the start of the month. In fact, a number of analysts are still bullish on Zoom.

Wut We Think: It’s never great when a tech company releases a product with giant, glaring security flaws - but Zoom did act quickly to patch the problem once the flaw was revealed publicly. Security flaws aside, Zoom is still gaining converts to its stable, easy-to-use video conferencing software, junking old standbys like Skype, Google Hangouts, and Facetime. Its fundamentals are both sound and growing, and, if the company manages to avoid any major slip-ups, like another security bug, it’s set to keep a steady growth.

S&P Sets New World Record By Passing 3,000

Maybe it’s just a number, but it’s big and what the bulls are thinking as the S&P surpassed 3,000 points last Wednesday for the first time in its history. The Standard and Poors Index which was launched in 1957, contains 80% of the US equity market by capitalization. The index broke this cap at the same time the US Federal Reserve Chairman Jerome Powell stated during testimony to Congress that the Fed will ‘act as appropriate to sustain the expansion’ - a signal that is pretty indicative of a rate cut.

So what does over 3000 mean anyway? Nothing particularly spectacular, but instead, it’s mostly an indicator that the US economy, in general, is doing relatively okay given the countervailing global pressures. Modest growth, modest inflation, a strong labor market, and stock valuations which don’t seem to be overstretched are all factors contributing to an environment for stocks to do well. It’s also a sign that investors are eagerly awaiting a Fed rate cut.

What do interest rates have to do with stocks? The rate, more correctly known as the Federal Funds Rate, is the rate at which banks lend to other banks. It’s also used as a benchmark for interest rates in general. Lower rates mean easier access to credit - including easier access to credit for firms - giving firms more financial freedom to act and the ability to increase capital expenditures. Stocks typically go up when interest rates are cut, since firms will spend less money on debt refinancing and more on whatever they deem necessary. 

Does that mean 4,000 is on the horizon? Don’t bet on it. In fact, the S&P 500 is only up 4.18% since January 2018, and is actually lower than US government debt gains over the same period. Once markets fully process and price in the probable rate cut, prices will go back to relying on slowing manufacturing numbers and middling growth.

Wut We Think: Actually, passing this milestone could mean more bad news than good. Most of the spike past 3,000 is estimated to come down to the Fed boss’ comments on Wednesday - a decidedly short-term look. In fact, the rate cut is coming because of inflation expectations below the FED’s target at 2%, the uncertainty over the US-China trade war, as well as oil price spikes due to tensions with Iran. This means that the Fed doesn’t actually think we’re in a good place, stock performance notwithstanding, and there are signs that the US economy may be slowing down. From an investor’s perspective, celebrating the milestone is all well and good - but trust your own strategy and risk tolerance over headlines.


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