Week in Review: Carnage in the Crypto Markets as Stability Returns to Wall Street
It was another volatile week for the crytpo markets, with prices crashing 22% on a combination of regulatory fears and cyber security issues involving one of the world’s biggest digital currency exchanges. A prominent bitcoin whale in Tokyo has also liquidated hundreds of millions of dollars worth of BTC on behalf of Mt Gox creditors, a process that will intensify in coming months with roughly $1.9 billion still on the books.
Equities outperformed this week, although investor sentiment took a major hit after President Trump signed an order that taxes steel and aluminum imports at a hefty price. The outlook on stocks may deteriorate before it improves now that the Federal Reserve is poised to raise interest rates in less than two weeks.
Cryptocurrencies Plunge in Dramatic Week of Trade
Cryptocurrencies experienced a dramatic fall this week, as rumors of a cyber breach at Binance triggered a large outflow from the market. Though Binance attempted to quell the rumors, the market continued lower after the SEC released a statement that digital asset exchanges must register with the agency. The statement applies to digital assets that are considered securities.
Fear, uncertainty and doubt continued to linger on news that a prominent bitcoin whale by the name of Nobuaki Kobayashi was offloading hundreds of millions of dollars’ worth of BTC on behalf of Mt Gox creditors.
By the end of Friday’s session, the global cryptocurrency market was valued at just $369 billion, according to CoinMarketCap. Seven days ago, the market was worth as much as $465 billion.
All the major coins suffered huge losses this week, with bitcoin hitting a low of around $8,400 on Friday. Ethereum plunged below $700, while Ripple XRP bottomed at $0.73.
Stocks Surge After ‘Perfect’ Jobs Report
A bullish jobs report sent U.S. stocks surging Friday, with the Nasdaq recording its first record high in six weeks. The technology-driven index surged 1.8% to 7,560.81.
The benchmark S&P 500 Index rose 1.7% to 2,786.57, with ten of 11 sectors contributing to the rally.
The Dow Jones Industrial Average jumped 440.53 points, or 1.8%, to 25,335.74.
A measure of implied volatility known as the CBOE VIX declined sharply on Friday to finish lower for the week. Wall Street’s favorite “fear index” settled at in the mid-14s, the lowest since Feb. 1.
Friday’s rally was triggered by a bullish nonfarm payrolls report that showed the addition of 313,000 jobs for February, the highest in one-and-a-half years. Analysts in a median forecast called for a gain of 200,000.
The jobless rate held at 4.1%, the lowest since 2000. Average hourly earnings grew just 0.1% from the previous month and 2.6% annually.
Investors may recall that it was a nonfarm payrolls report that triggered last month’s dramatic reversal for stocks. The January data recorded a 2.9% annual surge in wage inflation, which was the highest in over eight years, prompting investors to price in an imminent rate hike by the Fed.
Upbeat employment figures helped to counteract fears of an imminent trade war between the United States and its allies after President Trump signed an order to move ahead with planned tariffs on steel and aluminum. The order, which was signed Thursday, will see steel and aluminum imports taxed at 25% and 10%, respectively.
The Week Ahead
Cryptocurrencies are under pressure heading into the weekend, as investors continue to weigh the market’s regulatory outlook. In the eyes of Ripple CEO Brad Garlinghouse, the selloff in the market was overdone given that brokers still have many options in dealing with the SEC’s new provisions.
Garlinghouse said that, in the context of Wednesday’s statement, “I hear some in crypto talk about the current ‘regulatory uncertainty.’ What’s uncertain? SEC’s statements have been consistent and clear. ‘Regulatory uncertainty” is just a euphemism for ‘we wish we could ignore SEC regulations.’”
It remains to be seen whether calmer heads prevail. Price action over the next seven days could provide clues about whether investors continue in the direction of FUD or rationality.
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.
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