Valuation Strategies for Cryptocurrencies (Liquidity Spikes)
Happy Valentine's Day, Steemians!
Today, I wanted to explore the relationship between cryptocurrency prices and liquidity. Specifically, I want to discuss whether Robinhood adding cryptocurrencies can fuel price growth?
Liquidity, Demand, and Cryptocurreny
One of the biggest controversies coming out of the Tether/BTC investigations was a report (http://www.tetherreport.com/) which showed that each BTC price spike last year could be correlated to a Tether release. Because Tether was supposed to be pegged 1 Tether : $1, the fear was that Tethers were being printed out of thin air, then used to drive up the price of Bitcoin. In any event, this showed the power of liquidity and demand on Bitcoin's prices. More demand naturally means higher Bitcoin prices.
So...can Robinhood provide that same level of demand and liquidity to Bitcoin and Ethereum?
There are over ONE MILLION people on the Robinhood cryptocurrency waitlist. Again: ONE FRIGGIN MILLION!
If you assume that even only a small portion of them invest (say 10%), that's still over 100,000 people buying into BTC or ETH all at once. Since Robinhood only lets you buy and not short, this should have a one way directional impact on the prices: up.
Now are some of those folks already using other vendors, like Coinbase? Yes, for sure. In that case, there isn't new demand - just the same demand via a different channel. But I have to believe this is also attracting a new group of traders too.
Robinhood is notably limiting the states in which it provides access and staggering them - presumably to reduce volatility - but the increased liquidity should be a positive tailwind. We've seen the markets stagnant a bit in the wake of credit cards restricting usage (in addition to all the other nonsense from the media/regulatory fears, etc.).
In short, I'm looking for both BTC and ETH to pop in the coming months (granted, I'm just long crypto), assuming nothing else crazy happens on the regulatory front.
Thanks for reading and please feel free to leave any comments or questions below!
Disclaimer: This is only my opinion and is not a recommendation for a certain investment action or strategy.