● Bitcoin Hovers at $40,000 Resistance
● Institutional & Retail Interest Soars for Ethereum
● Analysts Say 'Blue Sweep' in the US adds Downward Pressure for US Dollar
Hello as always and welcome again to today's edition of Overbit Insights, where we try and offer our perspective on big stories and trends in financial markets.
To kick off today's edition, we take a look at one of the most incredibly performing assets of the last year, and the previous decade - Bitcoin. As we have written about previously, Bitcoin has continued its meteoric run into 2021. On 1 January, BTCUSD sat around $28,000. Just over one week later, and BTCUSD sits nearly 50% higher at the price of $40,847.
Zooming out on the weekly chart, and BTCUSD has only had two red candles since 5 October. No matter your opinion on cryptocurrency, this has been a truly historic run for one of the world's emerging assets.
At the time of writing, Bitcoin precariously sits right above the $40,000 level. Given this insane runup, traders, investors and analysts alike seem to be pretty split on where Bitcoin goes from here. Some call for BTCUSD to have a large, 30% or so correction, one that has been common in previous bull markets. Others are calling for an all-out parabolic break, sending Bitcoin to $20,000 and maybe even below. The other side refuses to compare BTCUSD to previous cycles and calls for new highs, given the billions of dollars being invested at the institutional and corporate level.
Though you'll likely find yourself in one of these camps, it's important to remember that predicting a market's movement is near-impossible, especially for an asset in price discovery that has continually defied what most people think will happen. That being said, make sure proper risk management is applied for these uncharted waters. Going forward, our next story of the day is reserved for the number 2 cryptocurrency - Ethereum.
As we have previously mentioned, despite the fanfare of Bitcoin's runup, Ethereum has actually outperformed BTCUSD in the past 12 months. Just a week into 2021 and it seems that this outperformance has finally piqued retail and institutional investors' interest.
According to a recent report by Coindesk, "more people are searching for the word 'Ethereum' now than ever before in its history". This revelation comes from analysing openly-available Google search data, showing that Google searches for 'Ethereum' have finally overtaken the high previously set in the 2017 bull market. Though ETHUSD has certainly warranted interest given its past performance, this level of interest is shocking considering that Ethereum has not overtaken its actual price level high yet. All-time high searches coming before all-time high prices, instead of the other way around, seems to be a potentially bullish sign for the market going forward.
The demand doesn't seem to stop at the retail level, either. According to data recently compiled by The Block, futures market volume for Ethereum reached an all-time high for December 2020.
Volume reached $257.06 billion in December, which stands 4.4%, or $10 billion more than November 2020, the previous high. Analysis by The Block shows that Huobi leads exchanges in futures volume with 32.8% being routed through their platform. Binance followed closely behind with 32.1%, and OKEx took the third spot with 16%.
Google searches and futures markets weren't the only sectors seeing all-time highs for Ethereum in December, either. New highs were seen for cryptocurrency exchange trade volume & web traffic, as well as on-chain stablecoin volume. Looking at all of these factors together, it certainly seems like Ethereum has momentum on its side to start 2021.
To close out today's edition of Overbit Insights, we pivot towards the traditional markets and how the recent US election may have a ripple effect.
A new story out of the Financial Times says analysts expect Democratic wins for the Senate in Georgia will add renewed, downward pressure on the US dollar, a currency that was already expected to decline in 2021. Judging by the current market, it seems this downward slide has already begun: After 7% losses in 2020, the US dollar (tracked by DXY) kicked off 2021 by hitting its April 2018 lows, which pushed the euro and the Chinese renminbi to multi-year highs.
Derek Halpenny, head of research for Emea global markets at MUFG Bank, had this to say: The political shift is "a clear negative for the dollar and reinforces our view of a further depreciation in 2021". He continued, saying that it could lead to more depreciation in the currency than previously expected.
It seems this downward spiral of the US dollar is being driven by the Federal Reserve's unprecedented level of economic stimulus to curb the coronavirus's economic impact. There's already been a more than $1 trillion stimulus package, and another $900 billion package is currently rolling out. On top of that, the Federal Reserve has undertaken a $120 billion per month asset purchase program in an effort to lift markets by filling up the Federal Reserve's balance sheet. There is much hope and optimism for change in 2021, and while that may be accomplished in regards to coronavirus recovery, it seems unclear if the US dollar will reverse its course anytime soon.
Thanks again for reading today's edition of Overbit.com's Insights. As always, we will do our best going forward to keep you covered on anything and everything to do with financial markets, from cryptocurrency to crude oil and everything in-between.