Cryptocurrencies are rarely out of the spotlight these days, as digital currencies, led by the increasingly ubiquitous bitcoin, continue to reach new record levels.
We take a look at the recent performance of and outlook for bitcoin [BTC], ethereum and dogecoin as the cryptocurrency and blockchain theme bounces back after the recent dip, setting a fresh all-time high for bitcoin above $60,000 over the weekend.
Bitcoin’s price has dipped back below the $60,000 level at the time of writing, after soaring to a new high of $60,094.80 on 13 March, according to bitcoinprice.com. The market average price is currently $59,805.60 (as of 13 March’s close), representing a rise of 22.64% in just a week, since bitcoin opened on 7 March at $48,775.37. Bitcoin has survived high volatility over the last three months, jumping 217.86% from $18,814.98 on 13 December 2020. Launched in 2009, bitcoin’s market capitalisation is now over $1trn.
Bitcoin’s market capitalisation
Bitcoin’s meteoric rise of late has partly been fuelled by a spike in institutional interest following Tesla [TSLA] CEO Elon Musk’s 8 February announcement that the electric vehicle manufacturer had invested $1.5bn in the cryptocurrency. In a further boost to bitcoin, Reuters revealed on 1 March that US investment bank Goldman Sachs [GS] is set to relaunch its trading desk for cryptocurrencies after a three-year hiatus. The move is part of a wider push into digital assets that may see Goldman launch a bitcoin ETF.
Ethereum, which went live in 2015 and also relies on blockchain technology, has made huge gains over the last year, climbing 1,424.69% from $123.64 to $1,885.13 as of 14 March’s close.
Ethereum rose steadily through most of 2020 but has really taken off this year, almost tripling in value from $737.15 on 1 January. In fact, the altcoin recently climbed as high as $2,036.29 on 20 February 2021, according to Yahoo Finance, but was unable to sustain above the $2,000 level and dropped back to $1,919.53.
Ethereum is comfortably the second-largest cryptocurrency by market cap after bitcoin, at circa $216.94bn (as of 14 March, bitcoinprice.com).
Dogecoin, despite initially being launched as a joke in 2013 by creators Jackson Palmer and Billy Markus, has evolved into one of the best-known altcoins and is currently the fifteenth largest crypto by market cap, at $7.858bn, according to CoinMarketCap.
While an infinite supply and low price helped dogecoin’s appeal, it initially came to prominence via social news site Reddit, and more recently a series of tweets from Musk have fuelled both interest in – and the price of – dogecoin. On 4 February, after Musk tweeted “Dogecoin is the people’s crypto”, the price leapt 50% to $0.0579. Dogecoin is off its 8 February high of $0.0849 but, at $0.0608 (as of 14 March), it is still trading 966.66% above its 1 January price.
Dogecoin's price rise since 1 January
On Saturday, Musk indicated via a tweet that he wanted to see Dogecoin listed on the US exchange Coinbase – a move that could open it up to new investors and see Dogecoin’s price really take off.
So, what is blockchain?
Blockchain technology is the backbone of cryptocurrencies. It’s a decentralised, shared digital database of a cryptocurrency’s transactions. Completed blocks with the latest transactions are recorded, added to the blockchain, and stored in chronological order as an open, permanent and verifiable record. A peer-to-peer network of market participants manage blockchains, following a set protocol for validating new blocks. Each “node” or computer connected to the network automatically downloads a copy of the blockchain. This allows everyone to track transactions without the need for central record keeping. Blockchain technology creates a record that can’t be changed without the agreement of the rest of the network.
Blockchain technology is a “combination of proven technologies, applied in a new way,” explains Coinbase. “It was the particular orchestration of three technologies (the internet, private key cryptography and a protocol governing incentivisation) that made bitcoin creator Satoshi Nakamoto’s idea so useful. The result is a system for digital interactions that does not need a trusted third party.”
“It was the particular orchestration of three technologies (the internet, private key cryptography and a protocol governing incentivisation) that made bitcoin creator Satoshi Nakamoto’s idea so useful. The result is a system for digital interactions that does not need a trusted third party” - Coinbase
Is the Blockchain theme bouncing back?
Blockchain has been one of the best performers over the last week across 34 disruptive innovation themes tracked by our ETF performance screener. Blockchain is currently the third-best theme of the month with a gain of 4.26%, and fifth-best over the last week after rising 8.58% (as of 12 March’s close). Over the month, the S&P 500 index has marginally outperformed the Blockchain ETF with a gain of 4.83%, but last week’s 8.58% jump comfortably outstripped the S&P 500, which rose just 1.17%, suggesting the cryptocurrency theme is emerging from its recent downturn.
Digging a little deeper into the Blockchain theme, one of three ETFs tracked is the Amplify Transformational Data Sharing ETF [BLOK], which rose 12.83% last week and a phenomenal 337.18% over the last 12 months. BLOK is an actively managed ETF that invests at least 80% of its net assets in companies involved in the development and utilisation of blockchain technologies. Its top holdings as of 15 March are Canaan [CAN] (6.79% weighting), MicroStrategy [MSTR] (5.73%) and Riot Blockchain [RIOT] (4.58%).
MicroStrategy’s CEO, Michael Saylor, is a big proponent of digital currencies and the company has been a prolific buyer of bitcoin recently. It added to its rapidly growing holdings after buying another $15m worth of bitcoin on Friday, reported Markets Insider’s Will Daniel. The business intelligence firm’s bitcoin holdings now total over 91,000 units, worth $5.26bn (using prices as of 11 Ma