Plumber Buying Doge Shows Retail Investors’ Power in Crypto

(Bloomberg) – A rocky weekend for the legions who flocked into everything crypto after Coinbase Global Inc.’s direct listing. did little to undermine its hold on retailers.

Dogecoin was up another 20% or so on Monday, even after most of the largest tokens, including Bitcoin, continued to decline. For Mike McGlone, a Bloomberg Intelligence commodity strategist, the recent run-up to the joke token is an example of retail involvement in crypto markets. His plumber recently told him he bought it.

According to McGlone, it is a result of the “perfect storm” of pandemic lock-ups, a lot of money in the system and investors’ ability to speculate around the clock. “Markets will never change – it’s only 24 hours a day, 7 days a week and the easiest to access in history,” he said. It is “a good example of just gambling for fun – unless participants lose too much money, especially because they took too much risk at the casino.”

While Coinbase’s market debut was undeniably a turning point for cryptos’ move to the mainstream, the weekend routine provided a hard refresher on one of the fundamentals of the market: violent price swings are common.

A false report from an anonymous Twitter account that the U.S. Treasury was cracking down on crypto money laundering was enough to help Bitcoin fall by as much as 15% on Sunday, days after they hit a record $ 64,870. While low liquidity over the weekend likely exacerbated the dive, the world’s largest cryptocurrency fell a further 3.5% on Monday.

That a false tweet can torpedo prices reminds us that, despite all the talk of Wall Street’s growing embrace of crypto, individual investors have a lot of weight to throw around. That dynamic is especially present on the weekend, when traditional trading desks go dark while Bitcoin and other cryptocurrencies continue to change hands. While Coinbase’s direct listing is an important milestone for crypto, for institutions and traders venturing into crypto, learning to live with that volatility is an important first step.

“It’s more of an introduction to all the people who started Bitcoin or crypto in the past week because of Coinbase, that crypto markets can be very volatile,” Philip Gradwell, chief economist at crypto data tracker Chainalysis, said over the phone. “In a way, this is nothing new if you’ve been in the industry for a few years.”

Even by crypto standards, sentiment looked tense late last week. Bitcoin rallied ahead of Coinbase’s highly anticipated listing, bringing the year’s gains to date to more than 118% at one point. That enthusiasm spilled over into so-called altcoins like Dogecoin, which is up more than 13,000% in the past year.

The movements can be jarring. According to data from Bybt.com, about $ 9.3 billion in so-called long positions in Bitcoin futures were liquidated on Saturday, followed by another $ 700 million on Sunday.

Such a downturn in Bitcoin was “inevitable” given the level of scum, Galaxy Digital founder Michael Novogratz tweeted over the weekend, adding that “things will be fine in the medium term” as institutions enter the space.

Shifting the power dynamics in favor of the institutions will be the “holy grail” for Coinbase, BI analyst Julie Chariell said last week, as companies are less likely to dump their assets as quickly as retailers. While individual investors made up only 36% of the stock market volume during the quarter ended December 31, more than 90% of Coinbase’s revenues came from retail.

Whether the cryptocurrency exchange is successful remains to be seen. But even if Bitcoin were to make its way into wallets and corporate balance sheets outside of MicroStrategy Inc. and Tesla Inc., the weekend will likely still belong to the individual investor.

“The private investor still dominates the crypto market,” said Steven McClurg, CIO at Valkyrie Investments, in a telephone interview. “If you see those kinds of promotions on the weekend, that’s exactly when all the institutional traders are sleeping or not working.”

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