One thing that many economists who are new to cryptocurrencies are scratching their head about is their ability to multiply. New coins are coming online at a rapid rate. Since the beginning of this year, the number of tradeable altcoins has nearly doubled (from 617 to 1205) and the value of all coins in circulation has risen by 952%.
Not all new coins are winners though. In fact, only about 1 in 10 new cryptocurrencies ever see their intended use and Vitalik Buterin was recently quoted to say that 90% of all tokens will eventually reach zero, and that’s being generous.
It’s important to bear in mind when trading any cryptocurrencies that the investments are extremely high risk. However, in some cases, the return is well worth the risk. As far as an overall investment strategy it is usually recommended to maintain a bulk of your portfolio on less risk and only reserve a small amount for higher risk opportunities.
In eToro we go to great lengths to ensure that you have all the tools to do this. Our new CopyFunds are designed to give you a ready-made portfolio based on your personal interests and the cryptocurrencies that we are adding to the platform are among the top traded in the world.
On that note, we’ve recently made public our decision on two Hard Forks to the bitcoin network. To learn what a Hard Fork is and what it means for our clients, click here.
Market Overview
Yesterday, marked the top for many stocks around the world as most of the global indices declined about 0.5% from their peak.
It’s been an incredible bull run so far since 2009 and though we may see it continue from here many market analysts are advising their clients to start getting defensive with their portfolios.
Aside from cryptos, stocks are generally seen as one of the most high risk assets and though the rise might continue for another 10 to 20% and possibly last for another year or so, it’s time to stop treating them as a safe haven investment.
Geopolitical risks are indeed escalating and though they may disappear from the front page news, issues with North Korea, Catalonia, Kurdistan, and even the Brexit persist.
One thing Safe
There are many safe havens in the market (ETFs, Swiss Franc, Japanese yen, Bonds, etc) and it’s always a good idea to diversify among them. One hedge that many are looking at right now are the original forms of money, Gold & Silver.
Though it’s still early on, one indication that we’ve seen and the one market correlation that seems to be holding up throughout this Fed induced breakdown of risk measurement is the precious metals.
A quick snap-shot of yesterday’s mild sell-off reveals that gold and silver indeed experienced a surge more than one hour before the stocks turned negative.
In addition, I just wanted to highlight the long-term trend on Gold, which has been building itself a solid line of support (yellow) over the course of the year.
Over to Europe
The announcement coming from the ECB today is one that the market has been waiting for for a few months now and could have a massive impact on the Euro and European stocks, possibly on many other assets as well depending on how it goes.
Currently, the European Central Bank is injecting approximately €60 Billion per month into the economy in order to prop up market prices.
Last year they were printing €80 Billion and at Draghi’s announcement last December he insisted that reducing the flow to 60 Billion was not considered a “taper.” (gradual reduction)
Well, Draghi lied!!
At today’s meeting economists are expecting the ECB to announce that starting in January, the monthly injections will be reduced to €30 Billion and that the program will continue at least until September of 2018. Of course, they could surprise the markets by changing either the amount or the time frame but this is the general expectation at this time.
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Though it’s quite common these days for bankers and politicians to tell fibs, it will be difficult for Mr. Draghi to continue with his previous narrative. The question then becomes how will the markets respond to the idea that someday, maybe soon, their support will be taken away completely.
Let’s have some fun with this one. The action will begin around 1:45 PM in Frankfurt Germany.
Have an amazing day ahead!
