The crypto bull market continued over the weekend as Bitcoin (CRYPTO: BTC) passed $85,000 and the Dogecoin (CRYPTO: DOGE) meme raged on. The election continues to be the hottest topic in crypto and there seems to be more solid footing on which to analyze the impact on crypto.
Since the close of trading on Friday through 1:30 p.m. ET Monday, Bitcoin is up 10.1%, Ethereum (CRYPTO: ETH) has jumped 11.6%, and Dogecoin is up 63%.
Start Your Mornings Smarter! Wake up with Breakfast news in your inbox every market day. Sign Up For Free »
The Saylor effect
Early today MicroStrategy (NASDAQ: MSTR) announced it has acquired another 27,200 Bitcoins for $2.03 billion to bring its ownership to over $11 billion of Bitcoin.
This has become a very highly leveraged way to invest in Bitcoin with MicroStrategy selling both debt and equity to fund more buying. What's interesting for the price of Bitcoin is this is a consistent buyer in the market, so it's almost a self-fulfilling prophecy that Bitcoin rises as long as MicroStrategy is buying at this scale.
What is less clear is whether the speculation around Bitcoin or MicroStrategy will end anytime soon. The company's market cap is now over $66 billion with only $24 billion of Bitcoin on the balance sheet. The market is expecting more buying ahead, which would mean more share sales, but that has worked out well in the past.
Doge meme continues to gain momentum
The value of Dogecoin continues to rise on hope that Elon Musk's potential involvement in the government will lead to some kind of value. There's no evidence that Dogecoin will generate any value even if Musk is involved in policy somehow, but that hasn't stopped traders from bidding up values before.
In the week since the election, dozens of tokens and stocks have jumped on little more than speculation about what might happen during a Trump administration, which is still more than two months away.
Back to reality
On a more substantive note, the policy environment is already starting to change. Pro-crypto candidates won seats in both the House of Representatives and Senate, which could bring more favorable laws for the industry.
But the more immediate impact would likely be at the Securities and Exchange Commission (SEC), where names are already being floated for positions. Daniel Gallagher (who is currently a lawyer at Robinhood Markets ), Hester Pierce, and Mark Uyeda have all been considered for positions and they all have very pro-crypto mindsets.
Whether this leads to policy changes that help Bitcoin, Ethereum, or Dogecoin is more uncertain.
The big question for crypto
It's very likely a more favorable policy environment is in place for crypto next year, but what does that mean? For Bitcoin and Dogecoin, the only value they add to the industry currently is in their price going up. But there's no disruption of the current financial ecosystem from those tokens.
Ethereum may have more upside with more uses of the blockchain, but even the native token may not be used much in transactions. Layer-2 blockchains and stablecoins have taken market share in transactions and I think that's where the value lies long-term.
For now, speculation is driving crypto higher, but investors should think about what happens when speculation fades. The underlying fundamentals of these tokens may not have the same value.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
See 3 “Double Down” stocks »
