Beware the Ides of March

Not that there’s anything historically ominous about the middle of March. The expression from the title of today’s update comes from Shakespeare’s play when the Soothsayer warned Julius Caeser about his own death.

In ancient Rome, the 15th day of the month of March was marked as a deadline for settling all debts.

Though I know it worried many economists when it became clear that people were borrowing money to buy Bitcoins, it somehow seems like a normal practice among the worlds leading financial institutions to borrow money in order to buy stocks.

While Bitcoin’s shakeout is now apparent to all and well underway, I fear what might happen if the same dynamic was to hit the equity markets with the same vengeance.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Kudlow’s Hot Tip
  • Hearing Disappointment
  • Where do we stand with Bitcoin?

Please note: All data, figures & data are valid as of March 15th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The White House has named a replacement for its top economic advisor Gary Cohn who quit abruptly last week.

Larry Kudlow is the former Chief Economist of the famous Bear Stearns, whose demise a decade ago set off the financial crisis of 2008. Kudlow, of course, got out many years before that and has spent much of his career since as a television personality on CNBC.

Though Kudlow is expected to be a more of a Trump loyalist, he’s already contradicted the President on the position of the US Dollar. In fact, even before the Senate Hearing confirmations have begun he’s already given us a hot trading tip….

Given the divergence between these two assets since the beginning of Trump’s term, I would say that if the trends reverse this could actually work out really well on many portfolios.

This graph shows Gold (in white) rising steadily, while the Dollar (green) is falling hard. This type of divergence can be a real opportunity for those who know how to seize it.

Bye Bye Franky

Another thing that seemed to slip under the radar of international media scrutiny was the Senate’s overwhelming approval for a partial repeal of Dodd-Frank. If passed by Congress, this bill proposed by Mike Crapo will drastically ease the restrictions on banks from becoming too big to fail.

Proponents claim that the harsh rules imposed on banks in the wake of the financial crisis were stifling the banks’ ability to raise capital. Opponents say that this was the exact intention.

Crypto Hearing

To say that the Crypto Congressional hearing yesterday didn’t go as well as was expected is a vast understatement. According to CNBC

That’s not to say there weren’t some bright spots. Representative Tom Emmer came out in favor of a lighter touch by regulators and calling for greater balance, somewhere between the current “wild west” state and total annihilation.

Brad Sherman, on the other hand, has emerged as a total blockchain cynic and there are more than a few unflattering trending memes of him on social media this morning.

Certainly, we will have a lot more clarity next week, when the G20 meets on Monday and Tuesday with cryptocurrencies at the top of the agenda.

My Take

Yes, we’ve seen a massive drop in the prices of many cryptocurrencies so far this year. Still, those who have been in the market for more than a few months are in fact seeing tremendous gains.

Notwithstanding, the price action in the market should not be taken as an indication of where the technology is headed. Just this week the government of Sierra Leone successfully used the power of the blockchain to ensure incontestable results contributing to a smooth and peaceful election. Something they had not seen in a very long time.

Bitcoin was created on the ashes of the global financial crisis with the intent to be a global and decentralized form of money. So far it is winning on this, especially in places where political uncertainty is rampant, despite the volatility in prices.

The current shakeout of speculative money is an amazing thing for the overall ecosystem and is conducive to the long-term growth of the asset.

Where the bottom will come in is anybody’s guess, but according to the chart we’ve been watching since January, we’re now testing the long-term trend line.

Let’s have an incredible, yet cautious, 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

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