Bitcoin, Dogecoin and other cryptocurrencies hit all-time highs driven by Elon Musk – but what does it mean for investors?

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Elon Musk
Elon Musk

Following the news that Bitcoin was driven to a new record high value on Tuesday morning – trading over $48,000 for the first time – Business Leader delved deeper into what it means for investors in the future.

As investors continue to react to the news that Tesla bought $1.5bn worth of the cryptocurrency, there are various options to consider before buying into Bitcoin.

A filing with the U.S. financial regulator on Monday revealed that Musk’s electric car company Tesla, has made the massive purchase of the digital asset which has jumped more than 300% in a year.

The surge in the price of Bitcoin and other cryptocurrencies, including Dogecoin – which was also fuelled by an endorsement by Musk on Twitter multiple times over the last week – comes as digital currencies become mainstream due to soaring interest from both retail and institutional investors, increasing levels of mass adoption, and as global interest rates remain at historic lows.

But how does a new crypto investor choose a platform on which to buy, sell, hold and exchange?

And could Musk’s assessment of the future of money be correct? Let us know at Business Leader, by emailing editor@businessleader.co.uk

Nigel Green, an influential cryptocurrency expert and CEO of deVere Group, one of the world’s largest independent financial advisory and fintech organisations, says there are five fundamentals to picking the right platform in the wake of Musk’s moves within the industry.

He says: “More and more people are wanting to invest into cryptocurrencies, knowing that they are the future of money. But many, even those who have extensive knowledge of the stock market, have concerns about selecting the right cryptocurrency exchange. The total capitalisation of the cryptocurrency market is now an estimated $1.2tn, but it is still lightly regulated. This means that it’s vital that investors know what to look for in an exchange.

“There are five fundamentals for your checklist. First, security. The system of a private exchange for saving consumer documents as well as funds should be as decentralised as possible as if it’s all on a couple of web servers, that makes them easy hacking targets.

“Investors should also look for a system that utilises two-step verification throughout login, such as a password, and also quick-expiring codes received through the app. Avoid exchanges which offer cheap trade costs or services but are based in areas around the world where investor security is weak.

“In addition, investors ought to assess exchanges as well as the businesses behind them as they would certainly do with any other organisation that they would depend on to protect their money.”

“Second, costs. Some exchanges are proficient at addressing costs in advance, while others hide them. Go for the exchanges that are upfront and transparent.

“Third, simplicity and ease of use. Take into account that you’re not always going to trade from your desktop. In fact, finding an exchange that focuses on ‘on-the-move’ trading via a secure app is often a better option.

“Fourth, dependability. Does the exchange run efficiently when trading quantity is high, or when the currencies rate is see-sawing? Some exchanges are notorious for their system accidents and trading stops.

“Fifth, client service. Make sure an exchange has a chat or fast communication service integrated.”

Green concludes: “Whilst Elon Musk’s Tesla, and other institutional investors, including PayPal amongst others, will have teams of crypto experts behind them, retail investors can also get involved. Investing in cryptocurrencies remains highly speculative and it is not for everyone – but one of the keys to success would be selecting the right crypto exchange.”

Bitcoin’s growth leads to 20x higher transaction fees as mining power grows by 38%

Data presented by cryptocurrency trading simulator Crypto Parrot indicates that Bitcoin’s fees per transaction has grown at least 20 fold in the last 12 months – something for future investors to consider, following Musk’s recent investment.

The growth was recorded between February 2020 and February 2021 on a 30-day average.

Rising transaction fees correlates with increase in BTC price  

In February last year, the fee was at $0.6, while on February 8, 2021, the fee was at $12.46, representing a growth of 1,976.66%. On a year-to-date basis, the fee has grown by 81.1%.

The increase in the Bitcoin transaction fee correlates with the asset’s recent surge in value. The report explores the drivers behind the rise in transaction fees.

According to the research report: “The surge in the asset’s value resulted in most people buying Bitcoin in a bid not to miss out on the rally. When prices surge, more potential investors show interest in buying Bitcoin since the fear of missing out (FOMO) usually sets in. In this case, the Bitcoin blockchain often gets congested as miners compete to process the transactions leading to a skyrocketing of fees.”

The transaction fees’ growth also reflects on the Bitcoin network’s total hash rate on a 30-day average. The analysis shows that the hash rate has grown from 109.7 million TH/s as of February 2020 to 151.7 million TH/s, representing a growth of 38.28% over the last 12 months. The hash rate has grown by 11.38% year-to-date.

The hash rate is the processing power of the Bitcoin network or the speed at which miners are able to perform proof-of-work calculations per second. Typically, the higher the hash rate, the more miners are participating in the network. As a result, more blocks are being mined reflecting the asset’s increasing price.

Is now the time for you to start investing in Bitcoin?

Gregory Klumov, CEO of Stablecoin Platform STASIS says that investors need to keep buying Bitcoin and develop a buying strategy, as it’s a great way of saving money and storing value.

He says: “A smart strategy would be to buy a fraction once a week, once a month, regardless of the price. It is an asset that will carry value 20 years into the future. Therefore, $48.000 or $52.000 – is not so important. It is much more vital that more and more companies will buy it not as a means of speculation but as a store of value, which means that the lower band’s price will constantly rise.”

“It was $3.500 last year, this year it will probably be $35.000, next year it will be an even higher threshold. But at the same time, there may be a sharp correction from $52.000 to, for example, $35.000. No one can ever predict this. I’ve seen Bitcoin at $100, so it’s a philosophical question that someone didn’t have time to buy something. It is necessary to develop a buying strategy, and if you are exposed to emotions, you can lose a lot of money,” he added.

“It’s clear that negative real interest rates continue to push big players and corporates into alternative treasury assets like Bitcoin. I can foresee more enterprises joining the club in the long run. We are nowhere near a bubble though, the whole story of corporate demand story is just starting.”

What cryptocurrencies should you be watching?

Prior to the announcement of Tesla’s investment in Bitcoin/Dogecoin, Business Leader researched some statistics around the top platforms to keep an eye on.

After their impressive performance throughout the entire 2020, digital coins continued growing strongly in the first weeks of 2021.

According to data presented by Finaria.it, the combined market capitalization of Bitcoin, Ethereum and Tether, as the top three cryptocurrencies, jumped by 45% in a month and hit over $735bn in the last week of January.

Ethereum Market Cap Surged by 111% Between December and January

The year 2020 has witnessed an impressive growth of the entire cryptocurrency market, with digital coins performing as a store of value in times of crisis. In December, the combined market cap of Bitcoin, Ethereum and Tether, as the three leading cryptocurrencies, rose to $511.5bn, a 235% increase year-over-year, revealed the CoinMarketCap data.

However, the first few weeks of 2021 witnessed a surge in the price of the top three digital coins, with their combined market cap increasing by $228bn by the end of January.

Statistics show the market cap of the world’s leading cryptocurrency, Bitcoin, jumped by 35% in a month and hit $565.7bn last week.

However, Ethereum witnessed the most impressive market cap growth in the first weeks of this year. The price of the world’s second-largest crypto coin soared in January, adding almost $77bn to its market value, a 111% jump in a month. Statistics show that the Ethereum market cap stood at $145.6bn last week.

The combined value of all Tether coins has jumped by 27% since December, reaching $25.2bn in the last week of January.

Daily Trading Volume hit an All-Time High

Besides impressive growth in their price and market cap, the world’s leading cryptocurrencies’ daily trading volume also spiked in January, reaching an all-time high.

After peaking at $106.6bn on January 12th, Bitcoin’s daily trading volume stood at $78bn at the end of last week, almost a 20% increase in a month and a 168% jump year-over-year.

The CoinMarketCap data show Ethereum hit an all-time high on January 4th with $59bn in daily trading volume. Although this figure slipped to $39.6bn last week, it still represents a 20% jump in a month and a 232% increase year-over-year.

Statistics show Tether was the most-traded cryptocurrency last month, with $108.6bn in daily trading volume last week, an 11% increase in a month.

What happens next?

We want to hear from you! Will you be investing in cyrptocurreny? What should investors be looking out for? Is Dogecoin the future? Comment below or email editor@businessleader.co.uk.

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