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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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4.7 stars on average, based on 115 rated postsSenior Market Analyst at Etoro.com.




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Market Overview

Market Update: U.S. Stocks Rally on Banks, Industrials; Fed’s Powell Sees Big Risks in Cryptocurrencies

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U.S. stocks traded in positive territory Wednesday, as earnings tailwinds propelled banks and industrials companies higher while a slump in energy shares subsided.

S&P 500, Dow Rise

The large-cap S&P 500 Index rose 0.2% to 2,815.62, its highest in over five months. Gains were largely concentrated in just two sectors, with financials rising 1.5%. Industrials stocks, which include airlines and railroads, jumped 1.1%.

On the opposite side of the ledger, consumer staples and utilities companies were the biggest drags on growth, falling at least 0.6%.

Dow industrials added 79.40 points, or 0.3%, to finish at 25,199.29.

The technology-heavy Nasdaq Composite Index finished at 7,854.44, virtually flat for the day after reporting only minor upside earlier.

A measure of implied volatility known as the CBOE VIX touched new six-month lows Wednesday. The so-called “fear gauge” bottomed at 11.44 on a scale of 1-100 where 20 reflects the historic mean.

Powell: Cryptocurrencies Lack Intrinsic Value

Federal Reserve Chairman Jerome Powell lashed out against cryptocurrencies Wednesday in round two of his semiannual testimony before Congress. According to Powell, crypto-assets present serious risks to unsophisticated investors who are more likely to react to large fluctuations in market prices.

“There are investor and consumer protection issues as well,” Powell told the House Financial Services Committee before adding that digital assets lack intrinsic value.

Despite heading the most powerful central bank in the world, Powell’s take on cryptocurrency is hardly unique and suffers from the same ‘lack of sophistication’ that he says characterize bitcoin investors. As Hacked recently showed, arguments against crypto’s intrinsic value fail to take into consideration the vast resources required to maintain individual networks such as bitcoin.

Although Congress remains skeptical about digital assets, federal securities regulators are loosening their restrictions on the market. The U.S. Securities and Exchange Commission (SEC) has deemed bitcoin and Ethereum to be non-securities while at the same time opening up new avenues for security tokens to be traded on regulated exchanges.

Cryptocurrency Market Cap Approaches $300 Billion

Cryptocurrency prices continued higher Wednesday, as bitcoin’s sudden rally sparked a wider uptrend in altcoins, resulting in the highest market valuation in over a month.

Bitcoin traded above $7,500 on major exchanges while major altcoins like Cardano and Stellar Lumens put up double-digit gains. At the time of writing, the total cryptocurrency market was valued at $288 billion, according to CoinMarketCap. The market’s total value peaked above $297 billion.

The large uptrend has been accompanied by an equally impressive jump in trading volumes. Total market turnover exceeded $21 billion for the first time since May. It’s also a 70% increase from week-ago levels.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of 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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4.6 stars on average, based on 499 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Market Overview

DJ King Crypto Banker

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Hi Everyone,

If you’re reading this, you probably agree that the old school financial industry is in need of a shakeup. It seems that Goldman Sachs agrees.

This hit track is a remix of the old Fleetwood Mac song “Don’t Stop Thinking About Tomorrow.” It was created by Goldman’s incoming CEO David Solomon (AKA: DJ D-Sol). Named after two ancient kings and an angel, Solomon will assume the throne on October 1st.

Current CEO Lloyd Blankfein was famously indecisive about cryptocurrencies, yet over the last few months, it’s become clear that the bank is ramping up their cryptotrading activities in a big way.

Solomon has been a lot more clear on crypto and has gone on record saying that Goldman is focused on crypto due to a high level of demand from their clients.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Dollar Climbs – Gold Falls
  • Bitcoin Party Time
  • Double Double Crypto Day

Please note: All data, figures & graphs are valid as of July 18th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

President Trump admitted yesterday to making a mistake. After causing a global stir backing Putin over the FBI at the Helsinki summit, Trump has now walked back his comments and even admitted for the first time that he agrees with the assessment that Russia was indeed behind the meddling in the 2016 elections.

Though many remain unconvinced, the markets remain unfazed and instead the focus from many analysts remains on the possibility of a ramped up trade war with China and on the Fed’s actions.

In his testimony yesterday, Fed Chair Jerome Powell did his best not to be political but did note that the effects of further tariffs would likely be felt throughout the US economy. Today Powell testifies before the House Financial Services committee. We can probably expect further questions from the House regarding the specific reaction the economy might have to said tariffs.

Stocks are rather mixed today but we do have notable moves in the currency market where the US Dollar is gaining strength.

The US Dollar Index is once again bumping up against resistance at 95 points. If this level is passed, it could lead to further gains, especially since the United States seems to be a lot more aggressive than the rest of the world on their plans to raise interest rates.

In line with the stronger Dollar, the metals have continued to decline. Gold is now the cheapest it’s been in over a year.

Bitcoin Surge!!

After more than a month of doing nothing, bitcoin broke out yesterday rising $656 in 40 minutes, bringing life and optimism back into the market.

Here we can see the strong break above the key resistance level of $6,800, clearing quickly past $7,000 then spending a short time above $7,500 before a retracement.

By looking at the volumes, it seems that the cause of the surge was from some fresh money entering the market. This graph from www.cryptocompare.com shows the incredible volume spike at the time of the surge.

This one shows the volumes by currency. The blue circle is the exact time of the surge. Notice the spike in USD volumes?

Lately, we’ve been seeing a trend that Tether (USDT) has been becoming more prominent in overall volumes. Tether volumes generally indicate cryptotraders speculation on the exchanges. The fact that this surge happened on USD and not Tether might indicate that it is due to fresh money coming in.

Double Double Crypto Day

Today the US Congress is set to hold not one, but two separate hearings that relate to cryptocurrencies. This is a clear sign that the US government is taking the crypto industry seriously and it seems that point of both hearings will be to help not harm innovation in the space.

The double-header comes as the SEC’s mailbox is reportedly inundated with letters from citizens urging them to approve VanEck’s Bitcoin backed ETF at their hearing on August 10th.

Shifting over to Wall Street, it seems that the bitcoin monthly futures contracts on both the CME and the CBOE group will expire today. As we’ve stated before, there is nothing to fear from the expiration of these contracts. The chances that any large player is trying to manipulate the markets using them is very slim.

Just to get a picture of the volumes of these markets, I’ve pulled the following graph from the Bloomberg terminal for you. This shows the daily volumes on the CBOE’s XBT futures since inception.

The small white line shows the average daily turnover, which is just under 5,000 BTC.

Even though the volumes on the CME are higher, it’s less significant for this analysis since they are using a more complex index as a reference rate for contract settlement and thus would be much more difficult for anyone to try and manipulate.

As always, let me know if you have any questions, comments, or feedback. I’m always happy to hear them. Let’s have an excellent day ahead!

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.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan | Facebook:MatiGreenspan

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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Market Overview

Market Update: U.S. Stocks Rise After Fed Chairman Testimony; Earnings in Focus

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U.S. stocks rebounded Tuesday after Federal Reserve Chairman Jerome Powell told Congress that economic growth and inflation should keep the central bank on track to raise interest rates later this year.

Stocks Rise

All of Wall Street’s major indexes reported gains on Tuesday, with the Nasdaq Composite Index returning to record territory. The technology-focused average climbed 0.6% to 7,855.12.

The broader S&P 500 Index rose 0.4% to close at 2,809.55, with seven of 11 primary sectors finishing in positive territory. Materials stocks were the biggest gainers, rising 1.3% as a cluster. Technology, consumer staples and healthcare stocks also outperformed the broader market.

Dow industrials gained 55.53 points, or 0.2%, to close at 25,119.89.

Expectations of 30-day volatility drifted toward six-month lows on Tuesday in a sign of prevailing calm on Wall Street. The CBOE VIX Volatility Index declined 6% to 12.06.on a scale where 20 represents the historic average.

Powell Testifies

Fed Chair Jerome Powell’s Congressional hearings began Tuesday in a session chaired by the Senate Banking Committee. Though not appearing overly hawkish, the Fed leader indicated that short-term interest rates are likely headed higher in the coming months.

“Overall, we see the risk of the economy unexpectedly weakening as roughly balanced with the possibility of the economy growing faster than we currently anticipate,” Powell said.

He added: “The unemployment rate is low and expected to fall further. Americans who want jobs have a good chance of finding them.”

The Fed’s policy-setting board is scheduled to meet July 31 but is not expected to raise interest rates again until the September gathering. Policymakers and investors have priced in two more upward adjustments this year to the federal funds rate.

Powell will resume his testimony on Wednesday.

Earnings in the Spotlight

With corporate earnings season in full swing, investors are closely monitoring top- and bottom-line results of S&P 500 companies.

Netflix (NFLX) reported weaker than expected subscriber growth late Monday, sending share prices sharply lower. According to The Wall Street Journal, the stock was poised for its single-worst session in two years.

Goldman Sachs Group Inc. (GS) posted bottom-line results that were higher than expected, but rising legal costs weighed on share prices. The Wall Street giant reported per-share earnings of $5.98, crushing forecasts for $4.66. Organization-wide revenue jumped 19% to $9.40 billion, compared with estimates for $8.74 billion.

The earnings season is off to a positive start with roughly nine of ten S&P 500 companies posting stronger than expected profit results. However, as of Friday, only 5% of the S&P 500’s constituents had reported.

Despite the robust results, half of the S&P 500 companies that reported as of Friday said currency swings had a negative impact on their business. After a disastrous start to the year, the U.S. dollar index has returned more than 6% over the past three months. DXY rose half a percent on Tuesday.

Featured image courtesy of 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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4.6 stars on average, based on 499 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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