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Esports Industry Set For Massive Growth

Alpha Esports Tech Inc. (CSE:ALPA)   The 2020 pandemic has changed the…
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Alpha Esports Tech Inc. (CSE:ALPA)  

The 2020 pandemic has changed the face of sports and entertainment in a way that has opened new opportunities that may have not been capitalized on prior. Some “pandemic era” industries may have run their course while others have evolved and become a more mainstream focus for consumers and investors alike.

Esports has actually seen a massive surge of interest and participation. This trend doesn’t appear to have any signs of slowing down right now either. That could mean an ideal time to take things seriously even during these early stages of the new industry.

Quietly, the writing may already be on the wall but Main Street hasn’t fully grasped the full opportunity (for now). This presents a potentially time-sensitive bull case to capitalize on the first stages of growth in this new arena.

Revenues from competitive gaming are set to be just shy of US$1.1 billion by the end of this year, according to market researcher Newzoo.*

Meanwhile, awareness of Esports continues to rise. There has been a flood of new interest in the industry since 2015. Just slightly more than 800,000 people had heard about it at that time. These numbers soon changed, right now, Newzoo finds that nearly 2 billion people are well aware of the industry itself with over 660 million making up the active live streaming audience.

Esports Is Far Outpacing The Stock Market!

We can also look to stock market trends to see how retail investors have responded to the potential of this new sector. Take a look at the VanEck Esports ETF (ESPO).

Since the start of 2020, including the pandemic drop, it has climbed as much as 110% after hitting 2021 highs of $143.77. While many stocks rallied on the back of the reopening trade, Esports stocks have far outpaced the overall market AND the tech sector COMBINED! From January 2, 2020 to highs of $422.82 in May 2021, the S&P (SPY) “only” climbed 30%. Furthermore the Tech Sector (XLK) “only” jumped 55% from the start of 2020 to highs of $143.77 in April 2021.

Does it surprise you that BIG INVESTORS are already clamoring for a share of this industry? While the likes Activision and Electronic Arts are scrambling for market share, pure play esports companies have already staked a claim in this emerging sector.

Alpha Esports Tech Inc. (CSE:ALPA) Is Trying to Position Itself To Disrupt the Billion Dollar Esports Industry

The 2021 debut of Alpha Esports Tech Inc. (CSE:ALPA) implemented a multi-pronged approach that includes esports, mobile gaming, and ecommerce. Its portfolio is built on the backbone of revolutionary products like its GamerzArena, setting the stage for a new type of competitive experience.

(CSE:ALPA) Presents A Turn-Key Solution For Gaming

GamerzArena could unlock huge value from Alpha Esports Tech Inc. (CSE:ALPA). According to the company it boasts over 100,000 active users and a rapidly evolving ecosystem. 

According to the company It has already partnered & worked with HUGE names in sports, entertainment, and education including:

The New Jersey Devils, The Vancouver Whitecaps, Barstool Sports, ESPN Radio, Devil Child, Oxygen Esports, Notre Dame, Syracuse University, Penn State, University of British Columbia, University of Rochester, Western Michigan University and others!

Alpha partners

Virtually every college, university and professional sports team has its own gaming division. The problem right now is that most don’t understand how to unlock the potential of the industry. This is where Alpha Esports Tech Inc. (CSE:ALPA) adds another layer of growth to its model.

GamerzArena & Alpha Esports’ Competitive Advantage

The company’s platform is based on building an active community of dedicated gamers. Not only can they play and watch games alongside their peers. They can compete in tournaments to earn prizes through daily tournaments.

Where the real opportunity comes to light is the way Alpha Esports Tech Inc. (CSE:ALPA) is monetizing its user base. The GamerzArena+ product is a subscription-based service that only costs $12.99. Members gain access to higher-paying tournaments along with the ability to access unique and special events.

GamersArena+ stores gameplay and statistical data on each of the participating gamers, allowing users the ability to monitor and improve their skills. There’s also a clear path for some to become professional gamers! Just like professional contact sports, GamersArena+ allows access for scouts from a number of universities and professional Esports teams to find raw talent from the company’s pool of premium gamers. 

gamerzarena

This is not just a company that’s hosting tournaments…unlike the vast majority of early esports companies in the stock market today, Alpha Esports Tech Inc. (CSE:ALPA) is fostering a community and building a unique ecosystem that appeals to everyone from novice gamer to professional esports superstar.

With a current claimed active user base of over 100,000 gamers, Alpha Esports Tech Inc. (CSE:ALPA) already appears to have a wide berth of talent to develop and bring into the next phase of professional gaming.

Case Study: Barstool Sports

Devlin D’Zmura, Social Media Manager & Content Producer at Barstool said that GamerzArena “exceeded our expectations across the board. The level of personal and interactive content it provides us for our community is invaluable!”

GamerzArena hosted an exclusive Fortnite event for Barstool that helped them boost their Twitch following by 15%. Considering that Barstool Sports on Twitch has over 100,000. Followers, this was no small level of growth.

barstool sports

Over 9,000 entries and 6,500 reentries were recorded along with 2,700 unique users. One of the bigger value propositions offered was that the event itself created nearly 270 days’ worth of streaming content. That led to over 6 hours per week spent by each user engaging with the brand!

Massive User Base Ushering In The Next Generation Of Esports Competitions

The company’s relationship with the Vancouver Whitecaps FC has now given exposure to Alpha Esports Tech Inc. (CSE:ALPA)’s offerings and GamerzArena to 40,000 members of the Whitecaps youth development league. Aside from their eligibility to become GamerzArena+ members (at $12.99/ month per member), the partnership also presents Alpha Esports Tech Inc. (CSE:ALPA) with sponsorship revenue, additional user acquisition, and future collaboration.

This will also establish a larger base for the company’s skill-based challenge events. Think “Esports” meets “Vegas”. We’re not only talking about competitive gamers but also the ability to wager on the outcomes of these challenge events. The larger the number of streaming competitions, the more opportunities for gamblers to wager.

Data Already Presents A Multi-Million Dollar Opportunity

Alpha Esports Tech Inc. (CSE:ALPA)’s data already estimates that 10-20% of GamerzArena freemium users will place head to head bets with an average bet size of $2-$10 per math per month. At the company’s 10% service fee, that could boil down to revenue of over $5 million just for this one vertical.* That’s assuming a $6 wager per month from just 15% of the company’s 500,000 user goal by the 4th quarter of 2021! The important part is that esports betting is set to grow exponentially and in the very near-term.

According to Market Insight Reports, the global esports betting market size is expected to gain market growth in the forecast period of 2020 to 2025, with a CAGR of 13.1%. From a revenue perspective, it’s expected to reach $13.05 billion by 2025! While this may seem like a larger than life opportunity, industry comparables already support the potential for rapid growth in esports companies.

Also keep in mind that this isn’t just about the desktop either. The company’s acquisition of Paradise City Gaming puts them in a position to capitalize on the growing body of casual and pro gamers on mobile platforms as well. 

Alpha Esports Tech Inc. (CSE:ALPA) aims to leverage Paradise City Gaming and its library of mobile games to grow its user-base through hosting skill-based contests, head-to-head betting and charging entry fees for tournaments. There are also key relationships with influential people including Jamie Foxx, which also opens the door to secure IP gaming rights to his films including Groove.

Just to give you an example, Skillz, a mobile game platform has shown the potential that mobile has in the esports world. The company saw its player growth increase from 9 million users to 18 million users in 2 years from 2016 to 2018. Now, its user-base is pushing 30 million+! Furthermore, first quarter revenue hit $84 Million in 2021, Up 92% Year-over-Year. It also raised guidance to over $370 million in revenue for the year.

With a growing pool of gamers searching for ways to not only monetize their gaming but also learn to become pro players, Alpha Esports Tech Inc. (CSE:ALPA) is building more than just another platform. Its mobile opportunity paired with its skill development platform could define the next generation in the esports industry.

The Alpha

With the creation of Alpha League, Alpha Esports Tech Inc. (CSE:ALPA) aims to establish itself as the go-to for gamer development. Its focus on talent building, scouting, and partnerships with leading sports & esports names could set it apart from its competition.

Being able to create a “triple A” division for esports could establish a clear opportunity that not many other companies have stumbled upon yet and its relationships with the likes of groups like the Vancouver Whitecaps may give it a running head-start. Integration of technology to not only identify talent but engage with prospects directly clearly establishes a more influential role in the Esports industry. Furthermore, being able to take an amateur and bring them into the professional arena presents a vertically integrated model for brand building and long-time fan loyalty.

What’s more, as DeFi has come to the forefront of tech and monetization, Alpha Esports Tech Inc. (CSE:ALPA) has begun establishing its own footing to embed itself into this segment. Its Bitcoin pegged Alpha Coin has been created to allow users to enter contests and tournaments while also giving winners the ability to redeem their Alpha Token winnings for local currency or purchases in the GamerzArena store.

Leadership Stands Out Above The Competition

No matter how well-oiled a company’s business model may be, leadership can define the true potential for growth. In this case, Alpha Esports Tech Inc. (CSE:ALPA) has establish a solid foundation built on the back of successful industry names including:

Matthew Schmidt
CEO/ Board of Directors

  • Technology and film entrepreneur.
  • Executive Producer on 9 films including Groove Tails, Dreamland, The Opening Act, Worth, Ride, and more.
  • Cumulative budgets of over $60 million USD.
  • Co-founded Paradise City Films & Advisor to Victory Square Technologies, Immersive Tech, and V2 Games.

Jonathan Anastas
Chairman/ Board of Directors

  • Group Chief Marketing Officer, ONE Championship & ONE Esports.
  • Former Global Head of Digital Marketing at Activision.
  • He helped Call of Duty achieve $10 billion USD in franchise sales globally.
  • Former Vice President & Global Head of Marketing for legendary video game brand Atari.

Brian Wilneff
COO

  • Esports & technology entrepreneur.
  • Founder of GamerzArena.
  • Played a key role in developing relationships with major colleges such as Notre Dame.
  • Key partnerships with Barstool Sports & ESPN Radio.

In addition, Alpha Esports Tech Inc. (CSE:ALPA) has amassed an advisory board with experienced names from leading companies including Red Bull, Oxygen Esports, Segev LLP, Reel One Entertainment, The Golden State Warriors, Imprint Entertainment, Mount Sinai, and even JW Marriott to name a few.

6 Things To Know With Alpha Esports Tech Inc. (CSE:ALPA)

  1. The growth potential for esports is expected to reach hundreds of millions of active viewers equating to billions in potential revenue within the next few years.
  2. Big names are already investing in the early opportunity of esports including Shaquille O’Neal, Robert Kraft, Mark Cuban & Tony Robbins.
  3. Alpha Esports Tech Inc. (CSE:ALPA) presents more than just an event-based business model offering the ability to foster professional advancement of emerging talent and monetize each step of growth.
  4. Alpha Esports Tech Inc. (CSE:ALPA) is establishing multiple revenue streams including subscription through a freemium model, wagering commissions, partnerships, sponsorships & DeFi tokenization.
  5. Corporate leadership has deep roots in some of the biggest brands looking to get into esports where Alpha Esports Tech Inc. (CSE:ALPA) has already built relationships with notable names including Barstool Sports, countless universities, professional sports teams & more!
  6. Since Alpha Esports Tech Inc. (CSE:ALPA) has just gone public in 2021, those looking at the company right now are seeing it at its earliest stages of growth.
esports penny stocks to watch right now

 Endnotes:

-NewZoo Data: https://newzoo.com/insights/trend-reports/newzoos-global-esports-live-streaming-market-report-2021-free-version

-$5.4 M Revenue per year: Alpha Esports May 2021 Investor Deck

-Market Insight Reports Esports Betting Market Size: https://www.marketwatch.com/press-release/latest-study-explores-the-esports-betting-market-share-trends-growth-and-forecast-2025-2021-03-01

Pursuant to an agreement between Midam Ventures LLC and Alpha Tech INC Midam has been paid $300,000 for a period from February 12, 2021, to April 2, 2021. We may buy or sell additional shares of Alpha Tech INC in the open market at any time, including before, during, or after the Website and Information, to provide public dissemination of favorable Information about Alpha Tech INC. Now extended to 6/30/2021 & no additional compensation of any kind has been received by MIDAM. Click Here For Full Disclaimer.

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Chronic stress and inflammation linked to societal and environmental impacts in new study

From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors…

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From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors can cause chronic inflammation in our bodies. Chronic inflammation is linked to serious conditions such as cardiovascular disease and cancer – and may also affect our thinking and behavior.   

Credit: Image: Vodovotz et al/Frontiers

From anxiety about the state of the world to ongoing waves of Covid-19, the stresses we face can seem relentless and even overwhelming. Worse, these stressors can cause chronic inflammation in our bodies. Chronic inflammation is linked to serious conditions such as cardiovascular disease and cancer – and may also affect our thinking and behavior.   

A new hypothesis published in Frontiers in Science suggests the negative impacts may extend far further.   

“We propose that stress, inflammation, and consequently impaired cognition in individuals can scale up to communities and populations,” explained lead author Prof Yoram Vodovotz of the University of Pittsburgh, USA.

“This could affect the decision-making and behavior of entire societies, impair our cognitive ability to address complex issues like climate change, social unrest, and infectious disease – and ultimately lead to a self-sustaining cycle of societal dysfunction and environmental degradation,” he added.

Bodily inflammation ‘mapped’ in the brain  

One central premise to the hypothesis is an association between chronic inflammation and cognitive dysfunction.  

“The cause of this well-known phenomenon is not currently known,” said Vodovotz. “We propose a mechanism, which we call the ‘central inflammation map’.”    

The authors’ novel idea is that the brain creates its own copy of bodily inflammation. Normally, this inflammation map allows the brain to manage the inflammatory response and promote healing.   

When inflammation is high or chronic, however, the response goes awry and can damage healthy tissues and organs. The authors suggest the inflammation map could similarly harm the brain and impair cognition, emotion, and behavior.   

Accelerated spread of stress and inflammation online   

A second premise is the spread of chronic inflammation from individuals to populations.  

“While inflammation is not contagious per se, it could still spread via the transmission of stress among people,” explained Vodovotz.   

The authors further suggest that stress is being transmitted faster than ever before, through social media and other digital communications.  

“People are constantly bombarded with high levels of distressing information, be it the news, negative online comments, or a feeling of inadequacy when viewing social media feeds,” said Vodovotz. “We hypothesize that this new dimension of human experience, from which it is difficult to escape, is driving stress, chronic inflammation, and cognitive impairment across global societies.”   

Inflammation as a driver of social and planetary disruption  

These ideas shift our view of inflammation as a biological process restricted to an individual. Instead, the authors see it as a multiscale process linking molecular, cellular, and physiological interactions in each of us to altered decision-making and behavior in populations – and ultimately to large-scale societal and environmental impacts.  

“Stress-impaired judgment could explain the chaotic and counter-intuitive responses of large parts of the global population to stressful events such as climate change and the Covid-19 pandemic,” explained Vodovotz.  

“An inability to address these and other stressors may propagate a self-fulfilling sense of pervasive danger, causing further stress, inflammation, and impaired cognition in a runaway, positive feedback loop,” he added.  

The fact that current levels of global stress have not led to widespread societal disorder could indicate an equally strong stabilizing effect from “controllers” such as trust in laws, science, and multinational organizations like the United Nations.   

“However, societal norms and institutions are increasingly being questioned, at times rightly so as relics of a foregone era,” said Prof Paul Verschure of Radboud University, the Netherlands, and a co-author of the article. “The challenge today is how we can ward off a new adversarial era of instability due to global stress caused by a multi-scale combination of geopolitical fragmentation, conflicts, and ecological collapse amplified by existential angst, cognitive overload, and runaway disinformation.”    

Reducing social media exposure as part of the solution  

The authors developed a mathematical model to test their ideas and explore ways to reduce stress and build resilience.  

“Preliminary results highlight the need for interventions at multiple levels and scales,” commented co-author Prof Julia Arciero of Indiana University, USA.  

“While anti-inflammatory drugs are sometimes used to treat medical conditions associated with inflammation, we do not believe these are the whole answer for individuals,” said Dr David Katz, co-author and a specialist in preventive and lifestyle medicine based in the US. “Lifestyle changes such as healthy nutrition, exercise, and reducing exposure to stressful online content could also be important.”  

“The dawning new era of precision and personalized therapeutics could also offer enormous potential,” he added.  

At the societal level, the authors suggest creating calm public spaces and providing education on the norms and institutions that keep our societies stable and functioning.  

“While our ‘inflammation map’ hypothesis and corresponding mathematical model are a start, a coordinated and interdisciplinary research effort is needed to define interventions that would improve the lives of individuals and the resilience of communities to stress. We hope our article stimulates scientists around the world to take up this challenge,” Vodovotz concluded.  

The article is part of the Frontiers in Science multimedia article hub ‘A multiscale map of inflammatory stress’. The hub features a video, an explainer, a version of the article written for kids, and an editorial, viewpoints, and policy outlook from other eminent experts: Prof David Almeida (Penn State University, USA), Prof Pietro Ghezzi (University of Urbino Carlo Bo, Italy), and Dr Ioannis P Androulakis (Rutgers, The State University of New Jersey, USA). 


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Acadia’s Nuplazid fails PhIII study due to higher-than-expected placebo effect

After years of trying to expand the market territory for Nuplazid, Acadia Pharmaceuticals might have hit a dead end, with a Phase III fail in schizophrenia…

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After years of trying to expand the market territory for Nuplazid, Acadia Pharmaceuticals might have hit a dead end, with a Phase III fail in schizophrenia due to the placebo arm performing better than expected.

Steve Davis

“We will continue to analyze these data with our scientific advisors, but we do not intend to conduct any further clinical trials with pimavanserin,” CEO Steve Davis said in a Monday press release. Acadia’s stock $ACAD dropped by 17.41% before the market opened Tuesday.

Pimavanserin, a serotonin inverse agonist and also a 5-HT2A receptor antagonist, is already in the market with the brand name Nuplazid for Parkinson’s disease psychosis. Efforts to expand into other indications such as Alzheimer’s-related psychosis and major depression have been unsuccessful, and previous trials in schizophrenia have yielded mixed data at best. Its February presentation does not list other pimavanserin studies in progress.

The Phase III ADVANCE-2 trial investigated 34 mg pimavanserin versus placebo in 454 patients who have negative symptoms of schizophrenia. The study used the negative symptom assessment-16 (NSA-16) total score as a primary endpoint and followed participants up to week 26. Study participants have control of positive symptoms due to antipsychotic therapies.

The company said that the change from baseline in this measure for the treatment arm was similar between the Phase II ADVANCE-1 study and ADVANCE-2 at -11.6 and -11.8, respectively. However, the placebo was higher in ADVANCE-2 at -11.1, when this was -8.5 in ADVANCE-1. The p-value in ADVANCE-2 was 0.4825.

In July last year, another Phase III schizophrenia trial — by Sumitomo and Otsuka — also reported negative results due to what the company noted as Covid-19 induced placebo effect.

According to Mizuho Securities analysts, ADVANCE-2 data were disappointing considering the company applied what it learned from ADVANCE-1, such as recruiting patients outside the US to alleviate a high placebo effect. The Phase III recruited participants in Argentina and Europe.

Analysts at Cowen added that the placebo effect has been a “notorious headwind” in US-based trials, which appears to “now extend” to ex-US studies. But they also noted ADVANCE-1 reported a “modest effect” from the drug anyway.

Nonetheless, pimavanserin’s safety profile in the late-stage study “was consistent with previous clinical trials,” with the drug having an adverse event rate of 30.4% versus 40.3% with placebo, the company said. Back in 2018, even with the FDA approval for Parkinson’s psychosis, there was an intense spotlight on Nuplazid’s safety profile.

Acadia previously aimed to get Nuplazid approved for Alzheimer’s-related psychosis but had many hurdles. The drug faced an adcomm in June 2022 that voted 9-3 noting that the drug is unlikely to be effective in this setting, culminating in a CRL a few months later.

As for the company’s next R&D milestones, Mizuho analysts said it won’t be anytime soon: There is the Phase III study for ACP-101 in Prader-Willi syndrome with data expected late next year and a Phase II trial for ACP-204 in Alzheimer’s disease psychosis with results anticipated in 2026.

Acadia collected $549.2 million in full-year 2023 revenues for Nuplazid, with $143.9 million in the fourth quarter.

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Digital Currency And Gold As Speculative Warnings

Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite. Such isn’t surprising given the evolution…

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Over the last few years, digital currencies and gold have become decent barometers of speculative investor appetite. Such isn’t surprising given the evolution of the market into a “casino” following the pandemic, where retail traders have increased their speculative appetites.

“Such is unsurprising, given that retail investors often fall victim to the psychological behavior of the “fear of missing out.” The chart below shows the “dumb money index” versus the S&P 500. Once again, retail investors are very long equities relative to the institutional players ascribed to being the “smart money.””

“The difference between “smart” and “dumb money” investors shows that, more often than not, the “dumb money” invests near market tops and sells near market bottoms.”

Net Smart Dumb Money vs Market

That enthusiasm has increased sharply since last November as stocks surged in hopes that the Federal Reserve would cut interest rates. As noted by Sentiment Trader:

“Over the past 18 weeks, the straight-up rally has moved us to an interesting juncture in the Sentiment Cycle. For the past few weeks, the S&P 500 has demonstrated a high positive correlation to the ‘Enthusiasm’ part of the cycle and a highly negative correlation to the ‘Panic’ phase.”

Investor Enthusiasm

That frenzy to chase the markets, driven by the psychological bias of the “fear of missing out,” has permeated the entirety of the market. As noted in This Is Nuts:”

“Since then, the entire market has surged higher following last week’s earnings report from Nvidia (NVDA). The reason I say “this is nuts” is the assumption that all companies were going to grow earnings and revenue at Nvidia’s rate. There is little doubt about Nvidia’s earnings and revenue growth rates. However, to maintain that growth pace indefinitely, particularly at 32x price-to-sales, means others like AMD and Intel must lose market share.”

Nvidia Price To Sales

Of course, it is not just a speculative frenzy in the markets for stocks, specifically anything related to “artificial intelligence,” but that exuberance has spilled over into gold and cryptocurrencies.

Birds Of A Feather

There are a couple of ways to measure exuberance in the assets. While sentiment measures examine the broad market, technical indicators can reflect exuberance on individual asset levels. However, before we get to our charts, we need a brief explanation of statistics, specifically, standard deviation.

As I discussed in “Revisiting Bob Farrell’s 10 Investing Rules”:

“Like a rubber band that has been stretched too far – it must be relaxed in order to be stretched again. This is exactly the same for stock prices that are anchored to their moving averages. Trends that get overextended in one direction, or another, always return to their long-term average. Even during a strong uptrend or strong downtrend, prices often move back (revert) to a long-term moving average.”

The idea of “stretching the rubber band” can be measured in several ways, but I will limit our discussion this week to Standard Deviation and measuring deviation with “Bollinger Bands.”

“Standard Deviation” is defined as:

“A measure of the dispersion of a set of data from its mean. The more spread apart the data, the higher the deviation. Standard deviation is calculated as the square root of the variance.”

In plain English, this means that the further away from the average that an event occurs, the more unlikely it becomes. As shown below, out of 1000 occurrences, only three will fall outside the area of 3 standard deviations. 95.4% of the time, events will occur within two standard deviations.

Standard Deviation Chart

A second measure of “exuberance” is “relative strength.”

“In technical analysis, the relative strength index (RSI) is a momentum indicator that measures the magnitude of recent price changes to evaluate overbought or oversold conditions in the price of a stock or other asset. The RSI is displayed as an oscillator (a line graph that moves between two extremes) and can read from 0 to 100.

Traditional interpretation and usage of the RSI are that values of 70 or above indicate that a security is becoming overbought or overvalued and may be primed for a trend reversal or corrective pullback in price. An RSI reading of 30 or below indicates an oversold or undervalued condition.” – Investopedia

With those two measures, let’s look at Nvidia (NVDA), the poster child of speculative momentum trading in the markets. Nvidia trades more than 3 standard deviations above its moving average, and its RSI is 81. The last time this occurred was in July of 2023 when Nvidia consolidated and corrected prices through November.

NVDA chart vs Bollinger Bands

Interestingly, gold also trades well into 3 standard deviation territory with an RSI reading of 75. Given that gold is supposed to be a “safe haven” or “risk off” asset, it is instead getting swept up in the current market exuberance.

Gold vs Bollinger Bands

The same is seen with digital currencies. Given the recent approval of spot, Bitcoin exchange-traded funds (ETFs), the panic bid to buy Bitcoin has pushed the price well into 3 standard deviation territory with an RSI of 73.

Bitcoin vs Bollinger Bands

In other words, the stock market frenzy to “buy anything that is going up” has spread from just a handful of stocks related to artificial intelligence to gold and digital currencies.

It’s All Relative

We can see the correlation between stock market exuberance and gold and digital currency, which has risen since 2015 but accelerated following the post-pandemic, stimulus-fueled market frenzy. Since the market, gold and cryptocurrencies, or Bitcoin for our purposes, have disparate prices, we have rebased the performance to 100 in 2015.

Gold was supposed to be an inflation hedge. Yet, in 2022, gold prices fell as the market declined and inflation surged to 9%. However, as inflation has fallen and the stock market surged, so has gold. Notably, since 2015, gold and the market have moved in a more correlated pattern, which has reduced the hedging effect of gold in portfolios. In other words, during the subsequent market decline, gold will likely track stocks lower, failing to provide its “wealth preservation” status for investors.

SP500 vs Gold

The same goes for cryptocurrencies. Bitcoin is substantially more volatile than gold and tends to ebb and flow with the overall market. As sentiment surges in the S&P 500, Bitcoin and other cryptocurrencies follow suit as speculative appetites increase. Unfortunately, for individuals once again piling into Bitcoin to chase rising prices, if, or when, the market corrects, the decline in cryptocurrencies will likely substantially outpace the decline in market-based equities. This is particularly the case as Wall Street can now short the spot-Bitcoin ETFs, creating additional selling pressure on Bitcoin.

SP500 vs Bitcoin

Just for added measure, here is Bitcoin versus gold.

Gold vs Bitcoin

Not A Recommendation

There are many narratives surrounding the markets, digital currency, and gold. However, in today’s market, more than in previous years, all assets are getting swept up into the investor-feeding frenzy.

Sure, this time could be different. I am only making an observation and not an investment recommendation.

However, from a portfolio management perspective, it will likely pay to remain attentive to the correlated risk between asset classes. If some event causes a reversal in bullish exuberance, cash and bonds may be the only place to hide.

The post Digital Currency And Gold As Speculative Warnings appeared first on RIA.

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