The whole crypto ecosystem has been booming in the past year and a half, led by Bitcoin’s astronomical growth and mainstream recognition. Ever since Thanksgiving the price of BTC and ETH has more than doubled, getting really close to $20,000 and $900 respectively. (Note: It’s January 2nd now and we are back at $15,000 for BTC. I let this sit in my drafts for too long.)
"I want to buy $[redacted] in bitcoin. Can you advise me?” — my dad— Ryan Hoover (@rrhoover) November 21, 2017
Prediction: Bitcoin pops to $10k by the end of Thanksgiving weekend
Cryptocurrencies aren’t the exception though; they are part of a long bull market that has been going on for almost a decade now. The S&P 500 has almost doubled in value since 2013, while other growth stocks have been going up much more rapidly ($NVDA, $SHOP, to name a few of the ones that I follow closely).
In the past year or two I’ve noticed a lot more people gaining interest in investing. Commission-free brokers like Robinhood have definitely helped with that, allowing more and more people to get their feet wet with stocks trading without needing a minimum amount of money to invest. I’ve looked at some subreddit numbers and they confirm that as well (Courtesy of redditmetrics.com):
/r/wallstreetbets is a “YOLO investing” subreddit. There’s not much interest in fundamentals and balance sheets, everything is mostly based on hype and rumors. $AMD was one of the subreddit favs in the past year. At the beginning of May the stock dropped 25% in 2 days after the quarter reports; in the following 7 days it went up 27%. It went back down another 30% in the last 2 months of 2017. Now compare the /r/wallstreetbets chart with the AMD price chart:
$AMD price chartI don’t think the Ryzen line was enough to make the price rise so much, and I don’t think the fundamentals changed that much either. If you read through those subreddits there’s a lot of people asking what “cheap stocks” to buy. $AMD checks all the buckets: tech stock, low price, recognizable brand.
I’ve read a lot about public companies’ CEOs worrying about short-term pressure that compromise long term goals. Is this gonna become outdated soon? We’ve seen stocks like $TSLA grow on the promise of future results while showing very little in the present. Lots of $TSLA holders talk about buying into the brand, the mission, not necessarily the financial statements. Would the price still hold in a bear market or would it fall even faster because of this?
If retail investors start valuing mission, team and brand more than pure financial results, is an IPO going to become a more viable option for private companies in the next 5–10 years? Or is it going to do the opposite? Are we going to see them trying to reach out to investors more through Reddit, Twitter, etc? Spotify is looking to go public through a direct listing; it will be interesting to see how it fares without the usual IPO roadshow, especially for a global brand like them.
I don’t have a definitive answer to these questions, nor I’m naive enough to think that I could come up with one, but I wanted to write my thoughts down for once, something I don’t do enough. What I know is that I’m excited to see how this plays out and how badly this post is gonna age in the next 5 years :)