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Here’s how the real estate market is driving cryptocurrencies in 2024

Published

7 months ago

6 May, 2024

Here's how the real estate market is driving cryptocurrencies in 2024

The interaction between these two disparate markets could intensify.

What to do Bitcoin (Bitcoin -2.28%), Solana, Dogemoneta (DOGE -4.10%) and other cryptocurrencies have in common with penny stocks and sports gambling? If you guessed “they are all places where excess capital migrates for the purposes of financial speculation”, you are thinking in the right direction.

But why should investors prefer these risky bets when safer investments like real estate are available? As it turns out, the housing market situation is actually one of the factors pushing money towards cryptocurrencies, at least recently.

A cocktail of problems is driving investors away from homeownership

As you’ve probably heard, the real estate market is exceptionally difficult for buyers right now. But understanding why is critical to appreciating the market’s impact on cryptocurrencies.

Consider this graph.

US core inflation rate data of YCharts.

As you can see, the inflation rate in the US it is still quite high compared to the long-term norm of around 2% per year. In its efforts to bring inflation back down after the post-pandemic surge, the Federal Reserve it quickly raised the federal funds benchmark rate, which determines the interest rates at which banks can lend. It is now at a relatively high level compared to where it has been since the 2008 financial crisis and the Great Recession, when the Fed cut it in an attempt to jumpstart the U.S. economy.

Today’s significantly higher federal funds rate has also pushed up the interest rates that lenders offer to would-be borrowers for mortgages. So, from a consumer perspective, there are several problems with the current state of affairs.

First, even though the current inflation rate has fallen significantly from last summer’s multi-decade highs, previous price increases are still baked into the prices people pay today. This makes everyday purchases, like food, seem prohibitively expensive, and for those whose wages haven’t kept pace, it may be harder to save funds for a down payment on a home. More importantly, even for those who have successfully saved for a down payment (or who already own homes with equity), with mortgage interest rates significantly higher than the past two years, the monthly payment on a loan of any size will be considerably higher than it would have been.

This makes it much harder for homeowners to justify selling their homes to upgrade to a larger dwelling, for example, as their monthly payments will almost certainly skyrocket if they take out their current mortgage any time before 2022 Because people are reluctant to sell if they can avoid it, the number of homes on the market is unusually low.

Now let’s consider this graph.

Median family income in the United States data of YCharts.

Home prices have increased dramatically faster compared to the average family income of recent years. Today, to afford the average home at the current price, a family would need to earn at least $113,500. But the median household income today is about $84,000. So the average buyer can’t afford the average home, and it’s going to take more than an increase or two to change that, given that home prices are still rising and inflation is still marching upward at a pace faster than the Fed would prefer.

It’s easy to see why this situation is causing a sense of sadness on Main Street. Widespread home ownership is one of the pillars of the American economy. When it doesn’t seem achievable, many feel as if… American dream it’s out of reach. And with a national housing shortage estimated at between 4 and 7 million homes, the problem won’t be solved anytime soon.

Even assuming the Fed starts cutting its key rate eventually and market interest rates fall, that will likely drive many would-be homebuyers off the sidelines, creating another hot market where fierce competition among buyers makes resulting in home sales closing at prices dramatically higher than their initial price. prices.

Furthermore, people who do not have access to a safe investment in real estate are missing out on the asset that has been the best financial tool for forced saving and long-term wealth creation. And it is precisely this scenario that has left so much capital free to pour into the cryptocurrency market.

Cryptocurrencies are a one-stop shop for taking risks

What should an investor do with excess capital if his or her income is not enough to swing the cost of a large mortgage?

The most obvious answer would be to invest in stocks and pursue a medium-term wealth creation strategy while accepting a higher level of risk, perhaps focusing on growth stocks. However, this approach, while fully reasonable, seems too slow and unreliable to many people today. Historically the stock market has grown on average about 10% per year. Those who choose a significantly riskier mix of stocks but who are lucky enough to make excellent picks could see their portfolios increase in value by an average of 25% per year.

But growth of this magnitude – which is very rapid and far in excess of what most global investors are able to sustain over time – still does not seem sufficient to ensure home ownership for many people, in part to due to the small amounts of capital they can allocate. In pursuit of their financial goals, they may therefore move further towards the edge of the risk curve. And cryptocurrencies, especially the riskier ones meme coinsthey represent an obvious market to enter in this context.

Bitcoin, with its growth of over 1,130% in the last five years alone, is only a starting point for returns of the desired magnitude. Dogecoin, up more than 5,940% over the same period, may seem like just the ticket for these relatively desperate investors.

Smaller, riskier cryptocurrencies can promise even higher returns over shorter periods, assuming they don’t drop to zero or near zero, as most of them do. Many of these smaller cryptocurrencies are listed on the Solana blockchain, which is currently experiencing a flurry of meme coin investment activity.

Taking huge financial risks can prove spectacular, especially for those who haven’t done it diversified their portfolios in advance. Investing diligently and long-term in stocks or blue chip cryptocurrencies like Bitcoin can almost certainly do more to support a person’s wealth creation goals than many of these new cryptocurrency investors assume.

However, people continue to flock to the more casino-like corners of the cryptocurrency markets, and they won’t stop until they feel their key financial goals are impossible to achieve with a combination of hard work and a more conservative attitude. investment approach.

So remember: as long as housing supply in the United States is strictly limited and mortgages are expensive, it will be a game for cryptocurrencies.

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News

Cryptocurrency Price August 1: Bitcoin Dips Below $65K; Solana, XRP Down Up To 8%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Major cryptocurrencies fell in Thursday trading following the Federal Reserve’s decision to keep its key interest rate unchanged. Overnight, the U.S. Federal Reserve kept its key interest rate at 5.25-5.5% for the eighth consecutive time, as expected, while also signaling the possibility of a rate cut at its next meeting in September. The unanimous decision by the Federal Open Market Committee reflects a continued wait-and-see approach as it monitors inflation trends.

CoinSwitch Markets Desk said: “Bitcoin has fallen below $65,000 after the US Federal Reserve announced it would keep interest rates unchanged. However, with markets now anticipating rate cuts at the next Federal Reserve meeting in September, the outlook for a Bitcoin rally by the end of the year has strengthened.”

Meanwhile, CoinDCX research team said: “The crypto market has plunged after the Fed decision. Tomorrow’s US unemployment rate announcement is expected to induce more volatility, with the ‘actual’ figure coming in higher than the ‘expected’ one, which is positive for cryptocurrencies.”

At 12:21 pm IST, Bitcoin (BTC) was down 3.2% at $64,285, while Ethereum was down nearly 4.5% at $3,313. Meanwhile, the global market cryptocurrency The market capitalization fell 3.6% to around $2.3 trillion in the last 24 hours.

“Bitcoin needs to clear its 200-day EMA at $64,510 to consolidate further. Otherwise, a retest of $62,000 could be in the cards,” said Vikram Subburaj, CEO of Giottus.

Altcoins and meme coins, such as BNB (3%), Solana (8%), XRP (5.7%), Dogecoin (5%), Cardano (4.6%), Avalanche (4.3%), Shiba Inu (3.8%), Polkadot (3.4%), and Chainlink (4%) also saw declines.

The volume of all stablecoins is now $71.64 billion, which is 92.19% of the total cryptocurrency market volume in 24 hours, according to data available on CoinMarketCap. Bitcoin’s dominance is currently 54.99%. BTC volume in the last 24 hours increased by 23.3% to $35.7 billion.

(Disclaimer: Recommendations, suggestions, opinions and views provided by experts are personal. They do not represent the views of the Economic Times)

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News

Altcoins WIF, BONK, RUNE, JUP Down 10% While Bitcoin Drops 4%

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Altcoins WIF, BONK, RUNE and JUP drop 10% as Bitcoin recedes 4%

Altcoins dogwifhat, Bonk, THORChain, and Jupiter have suffered losses of more than 10%, while Bitcoin is down 4% in the last 24 hours.

After a period of relative calm yesterday, July 31, Bitcoin (BTC) price action has seen a drastic change as the cryptocurrency dropped by more than $3,500, bringing its value to $63,300. At the same time, altcoins mirrored this trend, with the total value of liquidated positions rising to nearly $225 million over the course of the day.

Initially, the week started on a positive note for Bitcoin, which reached its highest point since early June, hitting $70,000. However, this peak was short-lived, as it was quickly rejected, leading to a substantial decline, with Bitcoin falling below $65,500.

The cryptocurrency managed to regain some stability, trading comfortably at around $66,800. However, following a Press conference According to Federal Reserve Chairman Jerome Powell, the value of Bitcoin has fallen again to $64,300, down more than 3% in 24 hours.

BTC Price Chart 24 Hours | Source: crypto.news

The recession coincided with a relationship from the New York Times stating that Iran had called for retaliatory measures against Israel following the assassination of Hamas leader Ismail Haniyeh in Tehran, increasing the risk of further conflict in the region.

Meanwhile, on the economic front, the Federal Reserve decided to keep its benchmark interest rates in place, offering little information on a planned September rate cut. Powell also hinted that while no concrete decisions have been made on the September adjustment, there is growing consensus that a rate cut is likely.

Amid Bitcoin’s decline, altcoins have suffered even more significant losses. For example, dogwifhat (Wife) saw a 12.4% drop and (DISGUST) has suffered a 10% drop. Other altcoins such as THORChain (RUNE) also fell by 10%, while Jupiter (JUPITER) and the Ethereum naming service (ENS) decreased by 8% and 9% respectively.

Among the largest-cap cryptocurrencies, the biggest losers are Solana (SOL) with a decrease of 8%, (Exchange rate risk) down 6%, Cardano (ADA) down 4%, and both Ethereum (ETH) and Dogecoin (DOGE) recording a decrease of 4.4%.

Data from CoinGlass indicates that approximately 67,000 traders have been negatively impacted by this increased volatility. BTC positions have seen $61.85 million in liquidations, while ETH positions have faced $61 million. In total, the value of liquidated positions stands at $225.4 million at the time of writing.

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News

Riot Platforms Sees 52% Drop in Bitcoin Production in Q2

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Riot Platforms posts 52% decrease in Bitcoin production for Q2

Bitcoin mining firm Riot Platforms has released its second-quarter financial results, highlighting a decline in cryptocurrency mined due to the recent halving.

Colorado-based Bitcoin (BTC) mining company Riot platforms revealed its second quarter financial results, highlighting a significant reduction in mined cryptocurrencies attributed to the recent halving event that took place in early April.

The company reported total revenue of $70 million for the quarter ended July 31, a decline of 8.7% compared to the same period in 2023. Riot Platforms attributed the revenue decline primarily to a $9.7 million decrease in engineering revenue, which was partially mitigated by a $6 million increase in Bitcoin extraction income.

During the quarter, the company mined 844 BTC, representing a decline of over 50% from Q2 2023, citing the halving event and increasing network difficulty as major factors behind the decline. Riot Platforms reported a net loss of $84.4 million, or $0.32 per share, missing Zacks Research forecast a loss of $0.16 per share.

Halving increases competitive pressure

The Colorado-based firm said the average cost of mining one BTC in the second quarter, including energy credits, rose to $25,327, a remarkable 341% increase from $5,734 per BTC in the same quarter of 2023. Despite this significant increase in production costs, the firm remains optimistic about maintaining competitiveness through recent deals.

For example, following the Recent acquisition Cryptocurrency firm Block Mining, Riot has increased its distributed hash rate forecast from 31 EH/s to 36 EH/s by the end of 2024, while also increasing its 2025 forecast from 40 EH/s to 56 EH/s.

Riot Platforms Hashrate Growth Projections by 2027 | Source: Riot Platforms

Commenting on the company’s financials, Riot CEO Jason Les said that despite the halving, the mining company still managed to achieve “significant operational growth and execution of our long-term strategy.”

“Despite this reduction in production available to all Bitcoin miners, Riot reported $70 million in revenue for the quarter and maintained strong gross margins in our core Bitcoin mining business.”

Jason Les

Following its Q2 financial report, Riot Platforms shares fell 1.74% to $10.19, according to Google Finance data. Meanwhile, the American miner continues to chase Canadian rival Bitfarms, recently acquiring an additional 10.2 million BITF shares, increasing its stake in Bitfarms to 15.9%.

As previously reported by crypto.news, Riot was the first announced a $950 million takeover bid for Bitfarms in late May, arguing that Bitfarms’ founders were not acting in the best interests of all shareholders. They said their proposal was rejected by Bitfarms’ board without substantive engagement.

In response, Bitfarms She said that Riot’s offer “significantly understates” its growth prospects. Bitfarms subsequently implemented a shareholder rights plan, also known as a “poison pill,” to protect its strategic review process from hostile takeover attempts.

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News

Aave Price Increases Following Whales Accumulation and V3.1 Launch

Published

4 months ago

1 August, 2024

BlockChainBulletin Staff

Aave price surges amid whale accumulation and V3.1 launch

Decentralized finance protocol Aave is seeing a significant spike in whale activity as the market looks to recover from the recent crash that pushed most altcoins into key support areas earlier this week.

July 31, Lookonchain shared details indicating that the whales had aggressively accumulated Aave (AAVE) over the past two days. According to the data, whales have withdrawn over 58,848 AAVE worth $6.47 million from exchanges during this period.

In one instance, whale address 0x9af4 withdrew 11,185 AAVE worth $1.23 million from Binance. Meanwhile, another address moved 21,619 AAVE worth over $2.38 million from the exchange and deposited the tokens into Aave.

These withdrawals follow a previous transfer of 26,044 AAVE from whale address 0xd7c5, amounting to over $2.83 million withdrawn from Binance.

AAVE price has surged over 7% in the past 24 hours amid buy-side pressure from these whales. The DeFi token is currently trading around $111 after jumping over 18% in the past week.

Recently, the price of AAVE increased by over 8% after Aave founder Marc Zeller announced a proposed fee change aimed at adopting a buyback program for AAVE tokens.

Aave v3.1 is available

The total value locked in the Aave protocol currently stands at around $22 billion. According to DeFiLlamaApproximately $19.9 billion is on Aave V3, while the V2 chain still holds approximately $1.9 billion in TVL and V1 approximately $14.6 million.

Aave Labs announced Previously, Aave V3.1 was made available on all networks with active Aave V3 instances.

V3.1 features improvements that are intended to improve the overall security of the DeFi protocol. The Aave DAO governance has approved the v3.1 improvements, which also include operational efficiency and usability for the network.

Meanwhile, Aave Labs recently outlined a ambitious roadmap for the projectwith a 2030 vision for Aave V4, among other developments.

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