The price of
Bitcoin
is down 16% over the last week and it appears the bears may finally be in control. $39,000 Canadian is now a key level of support. Should the price reach below that, investors could finally see a dip back to prices that the market was seeing before the holidays last year.
Retail Investors Are FOMOing On the Stock Market, Taking Money Out of Cryptocurrency
If there is one thing that the cryptocurrency community is proving over the last decade it’s that tech savvy retail investors don’t necessarily pour all of their capital into investments based on fundamental analysis. No, I’m not talking about the fundamental value of blockchain technology or Bitcoin here.
I’m talking about the video game store
and the movie theatre chain
. Both stocks are going through the roof right now as young retail investors on Reddit pour capital into these companies to try to bankrupt short-sellers (short-sellers are investors who try to turn a profit when a stock goes down in price).
Both of these are brick-and-mortar businesses rely on foot traffic to make money and are thus suffering because of the ongoing coronavirus pandemic. Still, their stock prices are up huge over the last week.
Without getting too technical, what’s happening with both companies right now is what is referred to as a short squeeze. Essentially when you’re counting on a stock to go down, you’re taking a huge risk because it can go up thousands of percentage points, causing you to lose more than your original investment
What do short-sellers do when they realize this is happening to them? They buy shares to try to cancel out their losses and lower their risk.
This causes a stock to skyrocket because bullish investors are buying shares to earn a profit and short-sellers are buying shares to avoid bigger losses creating a double whammy.
How does this affect the price of cryptocurrencies?
Less Volume Equals Lower Price
With so many of these young investors having made significant gains on cryptocurrency since the holiday season, there’s a good chance they may now be FOMOing their capital into these stocks in search of another huge short-term win.
Long-term HODLers should rejoice. This all means you’re about to get Bitcoin at a discount. But be careful, it may be a while before the market sees green numbers next to cryptocurrencies on a consistent basis again.
Still, if you’re willing to buy and hold for the long term, use
Netcoins
to do that.
If you’re looking to purchase Bitcoin or other cryptocurrencies,
. Netcoins is a fully regulated crypto trading platform in Canada.
If you want to learn more about all things in crypto, read more here.
Written by: Jack Choros
Writer, content marketing at Netcoins.
The information provided in the blog posts on this platform is for educational purposes only. It is not intended to be financial advice or a recommendation to buy, sell, or hold any cryptocurrency. Always do your own research and consult with a professional financial advisor before making any investment decisions. Cryptocurrency investments carry a high degree of risk, including the risk of total loss. The blog posts on this platform are not investment advice and do not guarantee any returns. Any action you take based on the information on our platform is strictly at your own risk. The content of our blog posts reflects the authors’ opinions based on their personal experiences and research. However, the rapidly changing and volatile nature of the cryptocurrency market means that the information and opinions presented may quickly become outdated or irrelevant. Always verify the current state of the market before making any decisions.
.png)
