Traditional Markets Ask Central Banks for Economic Recovery, while Bitcoin Celebrates it’s 12th Birthday
● The Euro Touches a 4 Week Low
● Bitcoin Happily Celebrates its 12th Birthday
● Eyes on Alternative Assets to Close out the Year
Hello again and welcome to this week’s edition of Overbit Insights. As we write this, we’re wrapping up another month in the markets and looking ahead to November and the rest of the year. In today’s edition, we’ll touch on all the major markets - forex, cryptocurrency, and commodities - and discuss what we believe to be the most significant stories going into November for each.
Starting off with the forex markets, we can see that the US Dollar is once again leading the way. Recent positive developments on the US data front, such as a 33% increase in GDP, have bolstered the US dollar against its counterparts, reaching a four-week high against the basket of currencies tracked by the DXY. Meanwhile, the Euro seems to be running in the other direction, as it’s wallowing near four-week lows against the greenback, due in large part to the European Central Bank signalling further monetary easing by the end of the year. “We agreed, all of us, that it was necessary to take action and therefore to recalibrate our instruments at our next Governing Council meeting,” the ECB remarked at their last meeting. Despite the involvement the ECB clearly plans to take in propping up their currency, it seems many are worried that the next meeting in December could “turn out to be underwhelming”, said Daisuke Karakama, chief market economist at Mizuho Bank
Our next story of the day is about Gold. Due to all the rampant inflation this year, we’ve seen Gold make a historic run, at one time even hitting an all-time high of $2,000. Since this top back in late August, we’ve seen this rally cool off since, where XAUUSD now sits at $1878.
It seems a large bulk of this rally was due to the global uncertainty regarding fiat currencies, especially the US Dollar. Although the effects of Coronavirus still very much linger throughout the world, it seems that the rebounding economy in America has dampened the interest around Gold. With so many governments still eyeing future’ monetary stimulus’, one would imagine this rally around Gold would be bound to continue in the near future. However, with our eyes very much in the cryptocurrency space, we wouldn’t be so sure that Gold is the best ‘inflation-proof’ trade, as more and more investors and institutions seem to be parking their portfolios in Bitcoin, the 21st-century gold.
Heading into our final topic is Bitcoin, which is celebrating it’s 12th Birthday this weekend. Exactly 12 years after the bitcoin white paper was released (October 31st), Bitcoin reached the highest level since January 2018 of $14,000. Bitcoin started with humble beginnings on underground message boards, and email newsletters yet have become one of the most formidable assets of all time. A lot of recent Bitcoin price action to the upside has come on the heels of institutional money entering the space in large quantities, as highlighted earlier this year with MicroStrategies buying almost $450M of Bitcoin to add their company reserves.
In addition to massive institutional money entering the space, the other large catalyst for this run is the Bitcoin halvening which happened earlier this year. This most recent halvening from May makes it the 12th anniversary of Bitcoin, and the 3rd bitcoin halvening, with the next one being in 2024. Many are continuing to speculate that Bitcoin will continue to increase in price as more and more institutional and retail investors continue to look at Bitcoin’s scarcity (only 21 million exist), as a direct opposition to the limitless printing of FIAT money by central banks, such as the future moves indicated by the ECB.
Closing out this month, and heading into the last two fiscal months of the year, we’d like to reflect on a few macro-trends we’ve noticed this year. Starting off primarily with the Coronavirus, we’ve seen countries around the world look to recover. Central banks have scrambled to repair the effects that global shutdowns and the Coronavirus caused, as we’ve seen labour markets in downtrends across the globe. The backdrop against this madness is the rise of alternative asset classes, in a quiet rebellion, against the central banks.
These alternative asset classes have been led by Bitcoin’s meteoric growth this year. Bitcoin (BTC/USD) in 2020, had yearly lows in the $4,000s, and now has recently peaked at $14,000 in October. This rise has made Bitcoin one of the most resilient investments of 2020. Bitcoin has made waves around the world, but Gold, known as the world’s safest safe-haven asset, has done specifically well this year, with Gold peaking out above $2000USD - an all-time high for Gold.
We’ve just two months left in the year, Overbit.com looks forward to closing out the year by continuing to provide world-class insights, tools, and education to the world’s traders.