The Nasdaq continued the fall from its all-time high on March 12, 2018. The Nasdaq is down nearly 10% since the high on a variety of news. The Nasdaq, which tracks tech stocks has suffered under the weight of massive losses in market capitalization by the likes of Facebook, Amazon, and Twitter.
The causes, which we’ll analyze below, are two-fold. In typical American fashion, they both revolve around Donald Trump.
The first Trump revolving drag on the Nasdaq has been the never-ending controversy over Facebook. Facebook continues to suffer the fall out of the Cambridge Analytica Scandal.
Here’s how the story goes:
- Aleksandr Kogan, a data scientist, develops a Facebook survey app called MyDigitalLife. MyDigitalLife amasses 300,000 users and has access to the data of more than 50 million of those users friends.
- Cambridge Analytica employed Aleksandr Kogan and used this data to create personality models on these 30 million Americans
- The company was then able to use organic Facebook action: likes, shares, and comments to target “persuadable” voters, leading to the election of Donald J. Trump
- Christopher Wylie blows the whistle on Facebook, fallout ensues.
In the days since Wylie’s stunning accusations, both Cambridge Analytica and Facebook have both vehemently denied these accusations. Nonetheless the damage has been done: Wylie and Zuckerberg are testifying in front of Congress, and Zuckerberg has been asked(and refused) to appear before Parliament; Cambridge Analytica is being investigated by Nigeria for the role it played in their elections, and Palantir has launched an internal investigation into its own employees connections to Cambridge Analytica (a sensitive matter in front of a potential IPO).
All this chaos has certainly done damage to Facebooks stock. Since the scandal broke, it has dropped more than 15%. The fallout of the scandal has spread beyond Facebook and is being echoed across the social media sector with Twitter following Facebook: the stock is down by 22% (despite not leaking any data). The scandal has, of course, raised broader questions over the sustainability of the business models of the many tech media giants that appear on the Fortune 500 list and shows no signs of stopping.
Further dragging on the Nasdaq is retail giant Amazon. Amazon is the latest in a string of companies(62, to be exact) that Trump has attacked on Twitter. Trump has threatened to raise shipping costs to hurt Amazon, and is even rumored to be exploring anti-trust action against Amazon. Some speculate the real source of the president’s ire is Amazon CEO Jeff Bezo’s ownership of the Washington Post. Sources have said of the Washington Post that “Trump doesn’t like The New York Times, but he reveres it because it’s his hometown paper. The Washington Post, he has zero respect for”. Essentially, Trump is waging a personal war against Bezos. Whether they like him or hate him, the stock market reveres Donald Trump. This reverence is evinced by Amazon’s 8% fall over the last month.
The Nasdaq’s slump is expected to continue over the coming weeks and the market as a whole looks like it will remain flat. So what does this mean for crypto? I set out to answer the question of how the stock market affects crypto markets in my previous post “How Today’s Stock Markets Crash Will Affect Cryptocurrency Markets” and re-analyzed my conclusion in another article later this month. The conclusion I arrived at, by comparing the VIX and Bitcoin and concluding that as the market performs better, so will Bitcoin. So what’s going on here? How can the entire crypto market be up when some of the biggest stocks are down double digits? Fundamentals.
My previous article was based on a technical analysis of the market. It turns out, this uptick might have something to do with the applications of blockchain rather than the markets themselves. Late last month, CCN contributor Gerelyn Terzo wrote an article examining how blockchain might fix the problems that plague centralized data systems like Facebook and allow users to reclaim their data. These same sentiments were echoed by the New York Times, CNBC, CNN and virtually every other mainstream media company.
This in addition to broad market sentiment that all crypto is undervalued at current levels, a further legitimization of crypto and even a lawsuits against Google, Facebook, and Twitter for banning cryptocurrency advertising have combined to create the market conditions for a rally. We might even be starting to see the shift of crypto from a risky asset, to a hedge against centralized tech stocks that I described when the Dow Jones made a significant downturn last month. Only time will tell, but it’d appear the whole market is feeling pretty good about crypto at the moment.
