This week's edition of Overbit's "Wednesday Worldview" will start by covering cryptocurrency - one of the only truly "global" asset classes. Taking a look first at Bitcoin, we can see not much has changed over the past few weeks. BTCUSD is still seeing very low price swings halfway through July, continuing to range in the $9000 region. ETHUSD seems to be tightly coupled to Bitcoin's stable price action, mostly ranging in the mid $200 zone.
Rather than focus on a somewhat dull range for both Bitcoin and Ethereum, we try to zoom out and see the bigger picture for the rest of the cryptocurrency market.
One of the more exciting stories to watch is the Bitcoin dominance chart. Historically, as bitcoin dominance drops (bitcoin dominance is represented by the total market cap of bitcoin / total market cap of crypto), the liquidity flows downhill and enters into what's traditionally known as altcoins. Due to a large amount of capital flowing into small projects, these smaller projects turn very volatile and can see incredibly dramatic price movements (Making crypto trading both fascinating and very risky for investors).
Looking at the Bitcoin dominance chart, we can see that it peaked in early September 2019. Since then, Bitcoin dominance is down nearly 13%. From a simple look at some of the altcoins during this stretch, it's evident that there has been an ongoing "alt-season." Several small-to-mid cap coins, especially ones in DeFi such as REN and COMP, have seen several hundred percentage gains in the past few months. The run is not limited to smaller coins; however, as we have seen significant cryptocurrencies like ATOM, LINK, and XTZ all make similar gains.
As always, keep an eye on Bitcoin and related info like Bitcoin dominance. No matter what, Bitcoin is still the number one in this space by many factors, and will continue to lead other digital assets for the foreseeable future
Moving onto traditional assets, we start with GBP/USD. This pair has been rallying for nearly two weeks, seeing an increase of almost 3.5% in that time. At the time of writing, GBP/USD is coming up on significant resistance at the 1.2670 level. Though it is too early to tell which direction the pair will move, it's clear the British Sterling is coming up on a decision point. Per the usual, the news cycle lines up as such, as the GBP/USD pair is coming up on a busy week, fundamentally speaking. In the UK, investors are eagerly awaiting the most recent numbers on employment, inflation, and GDP. Besides domestic information, further negotiations are also expected on the Brexit front, with leaders expecting to meet in Brussels this week. More information will be available at this meeting later in the week. Suffice to say, both of these events provide more than enough fuel for the GBP/USD pair to make a decisive move.
We move on to cover the EUR/USD pair next. Similar to GBP, the Euro is also approaching resistance levels, with several potential catalysts looming this week. The week's most significant event is on Thursday, in which the European Central Bank (ECB) is expected to make a rate decision. On the flip side, the US is supposed to release inflation data on Tuesday and retail sales numbers on Friday. With the greenback's recent poor performance, it seems clear that many traders are betting on the Euro. According to FXEmpire, "The latest Commitment of Traders report showed speculative long positions in the euro near highs not seen in two years.". However, it's worth waiting to see how either of these events will affect the market.
The last market we cover this week will be USD/JPY, the second most traded pair in all of Forex and an overall benchmark for Asian economic health. At the time of writing, USD/JPY has cleared the resistance level at 107.00. This price action takes place on the heels of the BOJ announcement that they will be appointing Seiichi Shimizu, "to lead a new monetary policy team to tackle the negative impact of the Coronavirus". Whilst a positive development, the overall sentiment of the financial markets seems to be risk-on at the moment, with American and European stock indices up several percentage points on Tuesday. Despite the current weakness of the USD, any risk-on sentiment will negatively affect the demand for safe-haven currencies like JPY.
Conclusively, the market's largest visible factor is still Covid, and with new lockdown, policies happening across the United States, and also in other countries, many other countries will start to follow. These lockdowns have shown to dry up manufacturing and service economies and could continue to drive anemic GDP growth globally over the next 24-36 months, but central banks will do their best to fix it, while cryptocurrencies will do their best to avoid it altogether.
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