Bitcoin gets a lot of ridicule for being a bubble, while the FAANG stocks are constantly fawned over. Maybe Bitcoin is a bubble, but then again, maybe it’s just one of many. Maybe the fact that $800 billion could plow into an entirely new asset class of digital currencies in the space of only 20 months indicates a general frenzy to stuff extra money into any crevice that seems to be fertile. Why? Consider, strictly from a technical perspective, what’s more overbought. Bitcoin, or FAANG stocks? The answer is not as clear as you would expect. Let’s crunch some numbers.
The first number to point out is the total market cap of all cryptocurrencies trading right now, which is $213 billion. By the time you read this the number could be different of course, but perspective seems to be lost to investors. If we take a step back and compare it to the combined market cap of the FAANG stocks, the cryptocurrency market is actually quite miniscule.
The total market cap of Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Netflix (NASDAQ:NFLX), and Alphabet (NASDAQ:GOOGL) currently stands at $3.56 trillion. That’s almost 17 times the total crypto market cap. Now think about this one little data point: The total number of dollars floating around in the entire US banking system is currently $14 trillion. That means that $1 out of every $4 available is currently invested in FAANG stocks, notionally speaking. Obviously if everyone tried to cash out at once, much less than $3.56 trillion would be redeemed.
In any case, if we compare very basic technicals for Bitcoin and the FAANG stocks, here’s what we get. Facebook, currently trading at $178, is right at its 50 week moving average. This, as we’ll see, is the exception. It is currently 38% above its 200WMA. Amazon is trading at 34% above its 50WMA, and 125% above its 200WMA. Moving to Apple, the world’s first trillion dollar company is trading 20% above its 50WMA, and 62% above its 200WMA. Netflix is only 18% above the 50WMA, but a whopping 118% above the 200WMA. Finally, Alphabet, only 12% above the 50, but 48% above the 200.
If we average these numbers out, we get the whole FAANG complex trading at an average 17% above the respective 50 week moving averages, and 76% above the 200WMAs.
Comparing all this to the S&P 500 to gain some perspective relative to other equities before we turn our eyes to cryptocurrencies, the S&P is only 5% above the 50WMA, and 23% above the 200WMA. For all intents and purposes, the FAANG complex has had triple the momentum of the broader S&P for both the last 50 and 200 weeks.
What about Bitcoin? Well, it’s trading at 23% below the 50WMA and 140% above the 200WMA. That puts it in a similar position to Amazon and Netflix over the past 200 weeks. On the one hand this analysis can be seen as an exercise in futility. How can one really compare huge companies with revenues and earnings with a speculative cryptocurrency?
Granted, but let’s look at it another way. Bitcoin is bouncing off support for the fourth time since peaking in December. Let’s assume the bottom holds at around $6,000 give or take a few hundred dollars. If that’s the case and we ignore the parabolic speculative frenzy in the middle, then Bitcoin is up 57% over the last year. What about FAANG?
It’s not that different. Total FAANG market cap is up 47% for the year. That’s very much in the same ballpark with Bitcoin at 57%. Maybe that means nothing, but it does look to be that since Bitcoin got the attention of the mainstream, FAANG stocks and Bitcoin are moving up at basically the same rate, minus the whole bubble phase in late in 2017. If so, the problem may not be a Bitcoin bubble specifically, but that there is so much liquidity out there that it’s just looking for something to land on that has momentum. Record low interest rates for over a decade can do that. I wonder what happens when that environment goes away. Something tells me Bitcoin won’t be the only victim.
Disclosure: No positions