Global Markets Inch Higher as Crypto Valuations Soar

19 Feb 2021 · 3rd Party Analysis

WRITTEN BY ThorFX

In Summary

  • Bitcoin is close to $1 trillion in market value
  • Ethereum makes a new all-time high

European markets and US futures keep modestly higher for yet another day as market participants are approaching with cautious optimism on Friday, while crypto reaches for new heights. Investors remain fearful that the markets will see US inflation rising quickly this year on the back of the new cash injection into the US economy. European markets closed the session on Thursday in negative territory. UK’s FTSE100 led the pack, down by 93.75 points, or 1.40% to 6,617.15 points. The French CAC40 followed, lower by 37.51 points, or 0.65% to a close of 5,728.33. The German DAX was more contained in its move down, sliding 22.34 points, or 0.16% to a close of 13,886.93. Friday morning brings some green arrows across the European market as DAX is modestly higher by 0.35%, followed by the CAC40, up by 0.30%, while the FTSE100 is trading flat.

As stocks trade fairly muted, bitcoin is closing in on a $1 trillion valuation, boosted by a renewed buying wave this week. The number one coin registered a new all-time high yesterday, breaking above $52,000 and boasting a market cap of $970bn, surpassing Tesla’s valuation, which currently gravitates towards $750bn.

The surging valuation of the cryptocurrency market far outweighs the performance of traditional assets like securities and commodities. The recent rally continues to fuel the discussion about bitcoin’s role in society and whether its value corresponds to its real use cases. Crypto believers remain firmly convinced that the price projection will continue to climb as more institutions and professionals get involved. Supporters state that the asset can hedge risks such as inflation while it also offers protection from a weak US dollar. On the other hand, opponents approach the crypto market with a sense of caution as the bitcoin mania, according to them, is lifted by the waves of monetary and fiscal stimulus along with heightened speculative practices.

The Case for Digital Coins

Tesla chief Elon Musk, who has lately been one of the most outspoken proponents of bitcoin, called Tesla’s bet of $1.5bn in bitcoin “adventurous enough” in one of his latest tweets on Friday. He addressed bitcoin as “simply a less dumb form of liquidity than cash” and defended Tesla’s decision to include it in its balance sheet. Continuing his comments on cryptocurrency, Elon Musk stated that he is an engineer and not an investor. “However, when fiat currency has a negative real interest, only a fool wouldn’t look elsewhere”, his tweet said.

Tesla surprised both the corporate world and the crypto space with its most recent announcement this month. This made Tesla the first company to introduce the digital coin to the S&P500 index, or in other words, investors in index funds will technically hold bitcoin. The news was released early in February, prompting a surge in bitcoin’s price. The rally continues this week, fueled by increased hopes for more large-scale adoption.

The overall market cap of the cryptocurrency asset class surpassed $1.6tn earlier in the week. Bitcoin’s market share continues to slide and is now hovering around 60%, down nearly 10% year-to-date.

Ethereum, the second-largest crypto coin, reached a new historic record today, soaring to $1,950. Both Bitcoin and Ethereum are up by about 10% for the past seven days.

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