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Market Overview

Spillover Emerging

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Hi Everybody,

Plenty of interesting moves in the markets lately. Top of every investor’s mind is the Turkish Lira and its ongoing slide. Also, the Russian Ruble, Mexican Peso, and the South African Rand are making massive movements

Some experts are calling it an emerging market currency rout. The thing is, emerging market currencies shouldn’t necessarily correlate with each other.

The only thing they really have in common is that they’re traded against the US Dollar. This lends to the theory that the entire story is actually driven by the US Federal Reserve. As Jerome Powell is forced to react to rising inflation at home, other economies that rely on Dollar stability are bearing the brunt.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Japanese Spillover
  • Look at the Lira
  • Emerging Cryptos

Please note: All data, figures & graphs are valid as of August 13th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

To think, this situation with the Turkish Lira started with Trump imposing sanctions on August 1st, in relation to a detained pastor who Erdogan refuses to release.

Now it seems that neither is willing to back down and the showdown is affecting most major currencies. The most major of which is the Japanese Yen, which is being seen as a safe haven from this currency conundrum.

With the Yen gaining, the Nikkei 225 is taking a hit as a stronger Yen tends to harm Japanese exports.

Look at the Lira

Earlier this morning, the Turkish central bank did come out with some strong words to try and minimize the damage.

This type of rhetoric can sometimes have an impact on sentiment. Most famously when Mario Draghi stated that they would do “whatever it takes” to save the Euro in 2012. However, investors today were looking for a bit more than words from the central bank.

Later today we’ll also hear from the new finance minister. This recently appointed figure is actually the son-in-law of Recap Tayyip Erdogan. So he will have to put on a helluva show if he’s to impress anyone.

As I write, we see the USDTRY testing 7.

Those of you who are avid readers will recall that this whole thing started with a strong break above 5 Liras to the Dollar.

So similarly, if we get a break of 7, things could get even uglier.

Crypto Spillover

As we’ve stated before, crypto-assets tend to correlate most closely with high-risk markets. So it would stand to reason that a sell-off in stocks, might have a negative effect on crypto.

Looking at the numbers however, it seems the crypto markets are rather unaffected by the emerging market currency rout and are showing a mixed performance.

Crypto-enthusiasts now want to know if Turkish citizens are turning to crypto as a stable store of value in the face of a rapidly depreciating currency.

Well, it seems there have been some sources that seem to indicate this is the case.

Indeed, some Turkish exchanges are reporting that their volumes doubled in the last few days. Still, as they weren’t trading at incredible volumes to begin with, an increase of 100% somehow doesn’t seem to me to be a massive increase that would indicate mass adoption.

No doubt there are some who have turned to bitcoin. Many citizens are doing their best to get their wealth out of Lira’s by any means possible and there are even reports of large queues at luxury shopping malls.

Because it’s not clear how Turkish people access bitcoin, it will be difficult to verify if there has been any uptick in adoption. What I’m waiting for are the weekly stats from coin.dance, that should come out over the next few days.

Let’s have an excellent week 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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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 1 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 464 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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Market Overview

Bigger Fish to Fry

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Hi Everyone,

Unfortunately, we’re now in a state of emergency. No, I’m not talking about JPM Coin, we’ll get into that below. I’m talking about the United States, who seems to have averted a shutdown of the government but will now likely enter into a state of emergency instead. Not sure which is worse.

Still, the fact that the government will stay open seems to be reason enough to celebrate these days. However, the stock markets are declining across the globe today on something much more fundamental, the economy.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • US-China trade deadline: 14 days | Days to Brexit: 42
  • JPM Coin
  • Much Bigger Money

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

Traditional Markets

The major disappointment came yesterday from the US retail sector, which made for dismal reading.

The reaction from the stock markets was swift and brutal as the major indices, which have been on a tear since the December lows took a noticeable hit (purple circle). The fall is not so dramatic; of more concern is the lost opportunity on what could’ve happened had the report been fine.

The market was setting up as if to rise but now the rally could possibly be called into question. We’ll see.

After all, poor economic data has largely been interpreted by investors as good news for the last few years. The worse the data, the more likely the Fed is to prop up the markets with additional stimulus.

Even as I’m writing we can see the European session turning from red to green.

JPM Coin….

As the news was spreading fast across the interwebs, I already had a drink in my hand, getting ready for a show called “Blockchain on Booze.” The drunken panel, myself included, decided to discuss the big news from JPM right out the gate. Hope you enjoy the show.

On the face of it, though they’re calling it a “cryptocurrency” this new coin seems to have very little to do with the crypto market. With estimated daily transfers of $6 trillion, the bank was about due for a systems upgrade and after all, why not use a private distributed ledger system to streamline things for them and their clients?

There have been several articles saying that this news is bad for Ripple as it could eat into their core market. One article even claimed that JPM coin has killed the Bitcoin dream, but nothing could be further from the truth.

Especially in a nascent industry, having competition is good for business. In fact, the atmosphere among the XRP community was one of celebration more than anything.

Still, as we’ve seen many times over the last few years, the news, good or bad, doesn’t always impact prices. As we can see, prices barely budged yesterday.

Bigger Crypto Fish

Yesterday we were all celebrating the achievement of Anthony Pompliano and Morgan Creek, who managed to onboard the first known public pension fund into a bit of crypto exposure, a great achievement no doubt. Several hours later, crypto investment firm Grayscale also released a stunning report.

That’s right, over the course of 2018, one of the worst years for crypto prices in history, institutional money has continued to flow in. To be fair, the fund did perform a lot better at the beginning of the year before sentiment turned really sour, but as we can see, there were continuous flows in throughout the year.

Also notable is that 88% of the money was invested directly in their bitcoin product, yet another figure that shows BTC‘s clear dominance in the market.

Wishing you and yours a fantastic weekend ahead.

Best regards,

Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan Twitter: @MatiGreenspan LinkedInMatiGreenspan |Facebook:MatiGreen

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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