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Market Overview

A Quick Lesson in Purchasing Power

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As we watch, the price of Bitcoin is just now passing a unique milestone of $7,000 per coin. At this point, I would like to take a moment to point out the difference between holding government money Vs other assets.

If you had held $7,000 in cash since the year 2000, it would have lost an average of 2.15% in value every year due to inflation. Such that today, you would need $10,000 in order to buy the same amount of stuff with that money. Meaning, that today’s $10,000 has the same purchasing power as $7,000 did at the turn of the century.

If you would have put that $7000 in the stock market, say the Dow Jones, the investment would now be worth $20,000. However, we already know that that 20k has less buying power than money did in 2000. So if we adjust for inflation, the investment would be worth $14,000 of the Y2K Dollars. Meaning, You’ve doubled your purchasing power.

Let’s say you bought Gold. In 2000 the price was $275 an ounce, so you could have bought a total of 25 ounces. At today’s prices, those 25 ounces would be worth $31,900 of today’s money, or $22,000 of Y2K money. So you’ve more than tripled your purchasing power.

Let’s not even get started on specific individual tech stocks, or even think about leveraged investments, and certainly let’s not wander far enough into imagination land to arrive at cryptocurrencies. I think I’ve made my point.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of November 2nd. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

In light of the above maths, we can now understand how critically significant it is to the US Government to get timely and efficient tax reform in place.

As of now, Donald Trump and the Republican party both need a win. The Republican’s have pretty much controlled all three branches of US government as of January 20th but have yet to create any meaningful laws or legislation. Most of the year has already been wasted trying to repeal Obamacare but they have failed.

The deadlines they’ve set to get this tax bill passed are utterly ridiculous and it would take nothing short of a miracle to get it done. Picture Donald Trump sitting around a campfire with Senate Republicans singing Kumbaya in four-part harmony.

Stranger things have happened. If somehow they do get this done on time this market may yet still have room to grow. After all, economic figures are looking great and all the earnings reports coming out are showing businesses that are full of confidence about the future.

Reflection chart. Dow Jones since Donald Trump’s election and the promise of lower taxes…

Finally Some Action

The Bank of England will most likely make an announcement to raise their interest rate from 0.25% to 0.5%. The announcement will be made at 13:00 in London.

Rate hikes are extremely significant for currencies and this announcement will likely have a high impact on all GBP pairs along with the rest of the FX markets and the FTSE 100.

The markets are already expecting the change and it is likely already priced in. The more interesting news will be the monetary policy summary that will be released at the same time and a press conference with BoE Governor Mark Carney at 13:30.

Let’s see the history….

In the wake of the 2008 financial crisis, the BoE was compelled to lower their interest rates and leave them near zero until today, just like most of the world’s largest countries have done.

In the wake of the Brexit referendum, they did one final cut as a precautionary measure. And went from 0.5% to 0.25%.

Today, they will probably reverse that cut, leaving the rate near the floor. The big question that investors are asking, is what’s the future path. Will they begin an upward incline towards 5% or are they just going to leave it “one and done?”

Analysts are torn on this question, which is why the summary and conference will be vitally important and while we may not get a clear answer today and ripples of a hint can cause tidal waves in the markets.

Have an awesome day!!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation.
The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 152 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Stocks Surge on U.S.-China Trade Optimism; Dow Notches Eighth Consecutive Weekly Gain

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Stocks surged on Friday, with the Dow hitting its highest in over three months as investors embraced apparent progress in U.S.-China trade negotiations. Meanwhile, President Trump declared a national emergency over border-security funding mere hours after Congress approved a new budget resolution preventing a second costly government shutdown.

Dow Extends Winning Streak to Eight Weeks

All three of Wall Street’s benchmarks headed for gains on the final day of the week. The Dow Jones Industrial Average spiked 443.86 points, or 1.7%, to close at 25,882.25. That was the Dow’s highest settlement since Nov. 9.

Financial bellwethers Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co (JPM) were the Dow’s biggest gainers on Friday.

Read: JPMorgan Becomes the First U.S. Bank to Launch Its Own Cryptocurrency.

The broad S&P 500 Index advanced 1.1% to settle at 2,775.60. All 11 primary sectors finished higher and five reported gains of at least 1.1%. Financials were the biggest contributors to the rally, climbing 1.9% as a group. Energy stocks rose 1.4% and health care added 1.3%.

The technology-focused Nasdaq Composite Index added 0.6% to finish at 7,472.41.

A measure of expected volatility over the next 30 days fell on Friday to its lowest level since early October. The CBOE Volatility Index, also known as the VIX, reached a session low of 14.79 on a scale of 1-100 where 20-25 represents the historical average. Volatility usually drops when stocks rise.

U.S.-China Trade Talks See Progress

The White House on Friday touted progress in the ongoing trade negotiations between the United States and China after both sides concluded two days of meaningful dialogue.

In an official press release, the White House described the negotiations as “detailed and intensive,” which led to “progress between the two parties. The statement added: “Both sides will continue working on all outstanding issues in advance of the March 1, 2019, deadline for an increase in the 10 percent tariff on certain imported Chinese goods.”

China next week will send its trade envoy to Washington to resume the negotiations. While both sides have until Mar. 1 to get a deal finalized, President Trump has said he will let the deadline “slide” if the two countries make progress.

Trump Declares National Emergency

The wall is coming, says Trump. | Source: Shutterstock.

President Trump has declared a national emergency to unlock additional funds for his proposed 234-mile border wall with Mexico. The declaration ignited a new debate over the legality of increased border spending even though “national emergencies” are hardly novel among presidents.

Check out the week that was in our Week in Review: Jamie Dimon Gets Crypto Fever as JPMorgan Develops Stablecoin; Bitcoin Fundamental Improve

On Thursday, both houses of Congress passed $333 billion in new spending legislation. The budget allotted just $1.38 billion towards the border, which is well short of the $5.7-billion Trump had requested. Under the current budget blueprint, the United States would have enough funds to erect an additional 55 miles of barrier.

In a speech at the Rose Garden, Trump said a fortified border was essential to national security. “We’re talking about an invasion of our country,” he said, according to The Wall Street Journal.

Featured image courtesy of Shutterstock. Chart via Barchart.com.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Analysis

The “Accessibility Premium”: How Coinbase’s Overseas Expansion Could Affect Crypto Prices

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The accessibility premium refers to the affect on a cryptocurrency’s price when it is added to Coinbase. The $8 billion valued exchange is now looking to expand beyond its U.S-based institutional trading business to offer institutional services worldwide. Bitcoin, Bitcoin Cash, Ethereum, and Litecoin may end up being the greatest beneficiaries. These cryptocurrencies could gain from increased accessibility; the new “Coinbase Effect”.

In 2018, as the exchange added more cryptocurrencies, some writers wrote about a perceived “Coinbase Effect”, like Ari Paul. They theorize about an “accessibility premium”, in which those crypto-assets that are more accessible rise in price. With Coinbase bringing crypto to worldwide investors, it could bolster demand for those coins that are listed on the San Francisco-based “Goldman Sachs of Crypto”. They would be more accessible. When a new cryptocurrency or token hit the exchange, traders might expect a bump in price. 

On May 3, 2017 Coinbase integrated Litecoin, resulting in a 30% increase in the price. When Coinbase listed Bitcoin Cash on December 19, 2017, trading on global exchanges skyrocketed. Bitcoin cash closed at $4,000. Two days prior, its price had been $2,200. Volume increased from $2.5 billion on December 18 to nearly $12 billion on December 20 for a 380% increase.

Coinbase added Ethereum on July 21, 2016, resulting in a modest 14% rally. Things changed when Brave browser’s token, BAT, launched on Coinbase. It declined in price. Further data is needed to know the truthful dynamics. By the time BAT was listed, the price of crypto had long since started a consolidation, leaving sentiment low.

Fast forward Q1 2019, and Coinbase is expanding overseas. It is laying down infrastructure for the long-term as it looks towards Asian markets, amid moves to attract international institutional money to cryptocurrency trading. (Coinbase’s product GDAX offers US-based institutional trading) New traders might find Coinbase’s familiarity welcoming. Higher volumes would be to expected for the cryptocurrencies offered by the Silicon Valley giant. 

So, the popular exchange is undergoing an extensive expansion. Coinbase customers residing outside of the U.S. can now trade without a domestic bank account. This could be a boon to the prices of cryptos offered by Coinbase, led by Bitcoin.

There has been discussion about the correlation between simplicity and demand. Opinions on the effect ease of use has on demand are not entirely aligned. As Donald Norman says in his book “Living with Complexity”:

… the so-called demand for simplicity is a myth whose time has passed, if it ever existed.

Make it simple and people won’t buy. Given a choice, they will take the item that does more.

Features win over simplicity, even when people realize that features mean more complexity. You do too, I’ll bet. Haven’t you ever compared two products side by side, feature by feature, and preferred the one that did more? …

Would you pay more money for a washing machine with fewer controls? In the abstract, maybe. At the store, probably not.

Ultimately, Norman argues for managed complexity. But, the demand for simplicity – or at least clarity – seems logical in a chaotic, complex world. In a blog on their website called “The Customer Demand for Pervasive Simplicity”, Cisco writes of this perception, and how it tailors its products towards this end.

A bastion of crypto-simplicity, Coinbase has long courted institutional investors in the U.S., but now its targets are clearly set on a global institutional book. The stage is set for crypto’s first truly global exchange, though Coinbase will need to first successfully assimilate into new countries, with their unique business practices languages, laws, and regulations. Currently, differing regulations in different countries keep crypto’s exchange ecosystem quite regional.

Coinbase holds 5 percent of all bitcoin, 8 percent of all ethereum, and 25 percent of all litecoin in circulation in cold storage. Its success overseas would likely underpin their prices if the “accessibility premium” holds true.

Marcus Hughes, recently appointed as lead counsel for Coinbase in the United Kingdom, has been tasked with overseeing cross-border expansion: “Coinbase takes the long view on bitcoin and wider cryptocurrency prices,” Hughes said, “We need to move beyond the speculation phase of bitcoin and cryptocurrency to the utility phase.”

He added: “The utility phase will mean bitcoin and crypto becomes more widely accepted and understood.”

This solidifies bullish sentiment from the exchange which will be strengthened should it be successful in its bid to attract ‘big money’, not just from a core user base in the U.S. but also from thriving crypto markets in countries such as Japan.

Coinbase reports that, “In the past twelve months, hundreds of crypto-first hedge funds have launched around the world, and many hundreds more traditional institutions have begun [actively trading digital assets]. High-volume clients across Asia will now have access to Coinbase’s flagship trading platforms for institutions. As part of this rollout, we now support inbound and outbound international (SWIFT) wire transfers, allowing Coinbase clients in Asia to fund their accounts from non-US bank holdings.”

Coinbase predicts a bright future for digital currency in Asia, it says, and looks to enter into a market that could help it to cement a role as one of the global leaders in crypto trading. But there remains a big question mark over cryptocurrencies, prominently over how regulation is going to play a role.

Marcus Hughes opines that this year will see a “massive change” for global bitcoin regulation. He says that Europe will gradually lead the way out of a “crypto winter” into regulated digital currency markets with more potential for long-term stability. But, in the short term, irrational trading might paint an entirely different picture. 

As we see Coinbase invest in the long-term it bolsters confidence in a currently inhospitable climate for bitcoin. Should prices continue to fluctuate market sentiment may dip, but it is the notion of institutional money that may serve to give cryptocurrency markets much-needed price stability. 

Image: David McBee, Pexels

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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5 stars on average, based on 2 rated postsJustin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.




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Analysis

3 Things You Need to Know About the Market Today: Extended Trade Talks, Economic Data Dump, National Emergency

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1, Trade Talks to Continue Next Week in Washington

S&P 500 Futures, 4-Hour Chart Analysis

The news of the day, so far, is clearly the unexpected extension of the current round of trade talks between the US and China. The negotiations will reportedly continue next week in Washington, and that could mean that some kind of formal agreement is already in the works. We expected, at least, and extension of the March 1 deadline, and although the rumors were pointing to that earlier on this week, the current state of the talks is even more positive for bulls.

That said, the mature global risk rally only managed to grind on, with the key markets missing real bullish momentum this week. The S&P 500 yet again hit marginal new recovery highs today, but the MACD indicator is clearly showing weakness, despite the week’s positive new flow, and as the Volatility Index (VIX) hasn’t been confirming the move either, we are sticking to our defensive stance towards equities here.

2, British Retail Sales Beat as US Consumer Confidence on Tap

FTSE 100 Index CFD, 4-Hour Chart Analysis

While the Great British Pound has been weak amid the continued Brexit-related uncertainty, with the weakening economic numbers also weighing on the currency, British equities have been outperforming in the meanwhile. Today, we had the first major positive economic surprise in a long-time from Europe, as the British Retails Sales Report was much better-than-expected, coming in at 1.0% vs. the consensus estimate of 0.2%.

The FTSE 100 hit its highest level since early October today, boosted by the weakening but still ongoing global risk rally and the weakening currency. Stock investors don’t seem to be concerned by the prospect of a no-deal Brexit, despite the apocalyptic forecast by the Bank of England and the anti-Brexiters.

The GBP barely budged following the strong retail sales data, and the GBP/USD pair is near its recent 1-month lows amid the Dollar’s broad push higher. US Industrial Production came in at -0.6% missing the consensus estimate of 0.1% by a wide margin, while the Empire State Manufacturing index was slightly better-than-expected. The day’s most-awaited US report is due to come out after the bell and analysts expect a slight uptick to 93.3 after the huge drop in the measure in December.

3, Dollar on the Verge of Break-Out as Trump to Declare National Emergency

Dollar Index, 4-Hour Chart Analysis

After some consideration, the President decided to sign the bill on border security that removes the immediate risk of a government shutdown. On the other hand, Mr. Trump will also reportedly declare a national emergency to secure additional funding for the Wall and the Democrats are already considering legal action to fight that decision.

As for the effects on markets, the fact that a second government shutdown is off the table boosted equities and the dollar today. Even though, we don’t think that the Border Wall saga is over and we are likely already deep into the 2020 campaign. With that in mind, we expect a ‘light’ legislative schedule for the coming two years, with the legislative gridlock giving a great chance to the Democrats to tackle President Trump ahead of the elections.

We have been tracking the Dollar’s rebound ever since the Fed meeting, and while the key resistance zone near 97, which roughly corresponds with the support zone between the 1.1250 and 1.13 in the EUR/USD, is still intact, a break-out to new multi-year highs looks more and more likely. The momentum of the short-term move could lead to a major break-out following the lengthy consolidation period, but we could still see volatility in the current trading range due to the several failed break-out attempts in recent months.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

EUR/USD, 4-Hour Chart Analysis

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 465 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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