It’s no surprise that the hype around bitcoin and other cryptocurrencies has turned many consumers — particularly younger ones — into investors as they chase the market’s unprecedented returns.
Cryptocurrency Hype Luring New Investors Into Stocks
One might assume that this bitcoin fever would result in decreased inflows to the traditional stock market, at least among the demographics most interested in cryptocurrency.
However, legendary investor Laszlo Birinyi said that he has observed the opposite phenomenon. Birinyi, the founder of stock market research firm Birinyi Associates, told CNBC that novice investors often become attuned to the stock market after first being lured into investing through cryptocurrencies.
“Bitcoin has woken up a lot of people,” said Birinyi during the phone interview. “All of a sudden more and more people are aware there’s a market going on, the stock market and there’s a way to make money.”
Like bitcoin, the stock market is currently in the midst of a prolonged bull run, and many new investors have begun to invest in traditional stocks and mutual funds rather than betting it all on cryptocurrency.
Many respected individuals within the cryptocurrency community, including Ryan Selkis and Alistair Milne, have encouraged investors with newfound wealth to consider taking a portion of their capital and diversifying into lower-risk investments such as real estate, stocks, and bonds.
But whether this is the case — or consumers are just investing more across the board — Birinyi said that the entire market is reaping benefits from the bitcoin hype.
“Bitcoin is a catalyst for a lot of interest. It’s everybody. It’s also giving the guy on the trading desk, sitting at a hedge fund, a shot in the arm,” Birinyi said.
Not Bullish on Bitcoin
That said, Birinyi is decidedly not a bitcoin bull. Although he has traded bitcoin futures, he stated that he believes that the cryptocurrency market appears to be a bubble and that he does not intend to invest any real capital in bitcoin.
“What I was trading was the fact there was an event. Futures were going to happen, which meant there was a focus on the area,” he explained, stating that he made $3,000 after just a single hour. “This is not investment money. This is the money you would spend on that new driver for your golf bag.”