One thing I’ve noticed is that the digital asset market seems to be a leading indicator on the Nasdaq. When things in the blockchain space fall, it usually leads to Nasdaq pulling back risk too.
Last week, even though we touched an all-time high (ATH), things just didn’t feel healthy out there to me.
So many stocks were having big red days, and the Advance/Decline (A/D) line was very weak. These aren’t the things we see on sustained breakouts usually. However, it appears the leaked information that AAPL was working on an electric car sent investors into risk-on mode, for a while, and the market marched higher until we finally got a big selloff yesterday.
Party like it’s 1999
But this made me start to think, what if the digital asset market is the new NASDAQ?
You see, back in 1999 and 2000 anything with a website would move hundreds of percent as new retail traders piled in. And companies with little to no revenues were getting valuations in the billions.
The same thing is happening in the digital assets space, with dog coins and NFT’s booming.
The building out of the Metaverse and virtual reality is going to change the Internet as we migrate to Web 3.0. There will be some big winners as we see the next Cisco, the next Amazon, and the next Facebook in the Digital Asset space.
….. Raging Bull’s resident expert Jake McCarthy has his own ideas of who could win in this space. This market euphoria that we’re seeing in blockchain-related companies makes me think that digital assets and funds like ARKK are the new NASDAQ.
Old Speculative NASDAQ
In 1999, the newly created index the NASDAQ was like the wild wild west. It was a new dawn for new companies and startups related to the growth of the Internet. New IPO’s would move hundreds of percent. Over the last year or so, we have seen similar action in the digital asset space, with hot new ICO’s listing on Coinbase seeing significant returns. Dog coins have been moving 1000’s of percent, because why not? The speculative money has moved into the digital asset space, because the market has decided that blockchain and Web 3.0 is the future.
Given that the NASDAQ is now mostly weighted by some of the best and biggest companies in the world, such as AAPL, Microsoft, Facebook, TSLA, NVDA, and GOOGL, it is no longer a representation of speculative tech stocks. It is now a blue-chip index for the most part, much like the SPY. So what is the new speculative tech index that the QQQ’s used to be?
Digital Asset Market Cap
I have two theories. One is that the total digital asset market cap could be the new speculative index to replace the QQQ’s. It can be found on https://coinmarketcap.com/charts/.
ARK Innovation ETF
The other is that today’s 2000 NASDAQ is ARKK. ARK Innovation ETF (ARKK) is filled with high-flying companies valued at lofty premiums with pretty bad balance sheets. They include stocks like TSLA, ROKU, TDOC, SQ, ZM, SPOT, COIN, U.
ARKK is down over 30% since its highs in February, all while SPY and QQQ’s made new all-time highs. In the 2000s bubble QQQ hit its all-time high in March and sold off 50% over the next 10 months. Yet 10 months after the SPY was only down 10%. before selling off over 40% from its highs the following 2 years.
Thus it is a very good idea to keep an eye on these new speculative indexes moving forward, as they may very well foreshadow the next market crash. Watching them definitely helped me catch some of the down move in TSLA yesterday when it had a delayed reaction to the selloff in ARKK and other growth stocks such as ABNB. Unfortunately, I didn’t have the courage to short the SPY and QQQ’s yesterday. I thought about it, but selloffs always happen when no one expects them. Even me, a true bear right now, I would never expect to see a rout like this on Monday of Thanksgiving week. However, I was able to ride my TSLA short!
I believe that digital assets are the new NASDAQ of 1999/2000.
Back then, speculative money flowed into web 1.0. The winners of this 1999/2000 bubble have become blue chips stocks while most of the others have fallen off or gone bankrupt.
Today the new NASDAQ is in the Digital Space where Investors are piling into web 3.0. Thus the market cap index of digital assets could be a good representation of the “new NASDAQ” or the future tech economy. In addition, ARKK, Cathy Wood’s Innovation ETF, could be one to watch as it is also full of speculative high-growth, money-losing companies.
Sustained weakness in either of these indexes could signal the start of a bear market, as it did in the NASDAQ in 1999/2000 although not right away. However, right now, the party is still raging like its 1999, with much interest in the digital asset sector in particular.