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Week in Review: Stocks, Cryptocurrencies and Commodities Rise

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It was a week filled with rallies on Wall Street and in the crypto sphere, as bullish investors doubled down on stocks and bitcoin. Commodity markets also rose, as the U.S. dollar fell against a basket of world currencies.

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Stock Rally Zaps Volatility

U.S. stocks settled near record territory on Friday as volatility  The benchmark S&P 500 Index closed at 2,55.17, two points shy of a new record.

The Dow Jones Industrial Average finished the week a hair below record highs after blue-chip J.P. Morgan Chase & Co (JPM) reported better than expected quarterly results. Several of the Dow 30 companies will report earnings next week, including Goldman Sachs Group (GS), Johnson & Johnson (JNJ) and Procter & Gamble (PG).

The technology-heavy Nasdaq Composite Index rose 0.2% on Friday to close at a new record high of 6,605.80.

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A measure of implied volatility that tracks the S&P 500 held in the single digits on Friday. The CBOE VIX closed at 9.61, on a scale of 1-100 where 20 represents the historic mean.

Across the Atlantic, Germany’s DAX Index logged another record close after Bayer AG (BAYRY) reached a multi-billion-euro deal to sell a portion of its business. The DAX closed at 12,991.87.

The pan-European Stoxx 600 posted minor gains for the week, but still managed to close at four-month highs.

Crude Oil, Gold Rise

The commodity markets were well supported this week, underpinned by stronger demand and a softer dollar.

In crude oil, U.S. West Texas Intermediate (WTI) rose 4.4% during the week to close at $51.45 a barrel. Brent crude, the international futures benchmark, tacked on 2.8% for the week to finish at $57.17 a barrel.

The market was propped up this week by a myriad of forces, including an improved demand outlook, bullish Chinese data and geopolitical risks from oil-rich Iran. Meanwhile, oilfield services provider Baker Hughes Inc. reported a second straight weekly decline in the U.S. oil-rig count.

In precious metals, gold prices topped $1,300 an ounce after another tepid reading of U.S. core inflation.

Gold for December delivery, the most actively traded futures contract, rose 0.6% on Friday for a weekly gain of 2.3%. The contract closed at $1,304.60 a troy ounce, the highest in almost three weeks.

The price of silver gained 3.7% during the week to close at $17.41. That’s the highest settlement on the Comex division of the New York Mercantile Exchange since Sept. 20.

U.S. economic data were far from disappointing on Friday. The Consumer Price Index (CPI) strengthened to 2.2% annually in September, while retail sales rebounded 1.6% from the previous month.

Cryptocurrencies Deliver Stellar Returns

Cryptocurrencies stole the spotlight this week, as bitcoin staged a massive rally en route to record highs. The BTC/USD exchange rate spiked more than 28% during the week, and briefly traded above $5,800, according to Bitstamp.

Bitcoin’s gains followed speculation that China would soon ease trading restrictions on cryptocurrency. An announcement by Coinbase that it was introducing an ‘instant buy’ program for U.S. traders also seemed to support bitcoin’s cause on Friday. The U.S.-based digital currency exchange has more than 11 million members.

Russia’s stance on cryptocurrency appears to have softened after a top central banker signaled for the closure of online bitcoin exchanges. High level talks between Kremlin officials and the business community have convinced President Vladimir Putin and central bank chief Elvira Nabiullina to pursue a regulatory framework instead of an all-out ban.

After initial apprehension, the broader cryptocurrency market followed suite. Ethereum jumped to six-week highs, while Litecoin also finished firmly higher.

The Week Ahead

Crypto enthusiasts will continue to monitor the news wire next week for regulatory developments from around the globe. On Wall Street, market participants can expect a deluge of third-quarter earnings results from the S&P 500 Index.  A steady stream of economic data will also make headlines throughout the week.

Featured Image Courtesy of Shutterstock

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Market Overview

What’s Behind the Cryptosurge

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If you’re reading this you’re probably aware of the unimaginable gains that have been seen across the crypto market this year. Last night we saw a new and very important milestone that has provoked some interesting commentary.

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The total value of all digital assets as listed on coinmarketcap.com has surpassed $500 Billion for the first time. To think, this number has grown from just $14.5 Billion one year ago today making for an unbelievable percentage growth of 3448%.

These numbers spark a lot of questions. Ethereum’s founder and one of the most notable figures in the crypto-space Vitalik Buterin posted a lot of these questions on his twitter feed this morning.

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Mostly, Vitalik wants to know if this valuation is justified and more importantly how are we changing the world for the better?

What cryptotraders like myself want to know is how long will this current surge last and what is likely to drive the market going forward.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Fed Day!!

Insane Inflation hits UK

Urgent Crypto Updates

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

Market Overview

Though I realize that many of you are here for crypto, there are some huge things happening in the traditional markets that we need to get out of the way first. At the end of the day, I’m a markets man and as such cannot ignore Fed Day.

This evening, the US Federal Reserve Bank who has been the biggest driver of market prices over the last decade will raise their interest rate from 1.25% to 1.5%. In Forex markets this type of move is usually a really big deal as we can see many large players moving their funds into Dollars in order to take advantage of the bigger rate.

However, as the market has already been certain that this move will come over the past month the increase of 0.25% is already priced into the markets. What investors really want to know is how much will they increase rates going forward?

Even though the Fed has boldly lied to us about how fast they will be raising the rates many times in the last few years, somehow what they say still holds meaning and so we must listen.

Overall, the Fed is on an extremely gradual pace to make money more expensive. US Dollars have been cheap and easy since the financial crisis of 2008, a policy that many say is causing some bubbles in the stock markets and imho is a major contributing factor to the current boom in cryptocurrencies.

This graph shows the expectations of 16 Fed members over the next few years. Each one places one dot for each year telling us where they think rates will be at that time. As we can see, even the most aggressive member is still expecting the rates to remain below 4% by 2020. So money is likely to remain extremely cheap.

Hyperinflation Is Happening Already

All this cheap money is extremely unsettling and even dangerous, for some regions more than others. Especially when there is an external event that suddenly changes the picture.

For example, a political crisis in Zimbabwe or Venezuela. But it’s not just the third world anymore. Yesterday the Bank of England announced a shocking inflation report showing that prices are up 3.1% in the last year.

Particularly concerning is the price of specific goods. Fish is up 15%, olive oil 9.3% and butter is up 23% over the past year.

Meanwhile, salaries in the UK have not gone up nearly enough to cover these higher prices. Today the UK will release their Average Earnings Report, which analysts are forecasting has risen just 2.5%.

Forex traders will react directly to the data as it comes out in real time. Though crypto-investors will not be reacting in such a methodical way, they are being affected by the overall trend and certainly feel their pockets getting pinched by the flawed system that increasingly favors the ultra-wealthy at the expense of Mr. Joe Public.

What’s next on this CRYPTO Surge?

It’s been a powerful run in the crypto market, especially over the last few weeks. Traders seem to be taking turns with the different top cryptos buying up one at a time, in many cases doubling or tripling the value within a 48 hour window.

It started with Ether Classic, then Dash, then IOTA, then Litecoin, and last night we saw Ripple nearly double in 12 hours.

Here’s a few important updates that may drive prices going forward…

Internet giant eBay is now considering to add bitcoin!! = Huge news if they do it!!

UBS and several others using Ethereum for MiFID compliance. MiFID 2 is a huge deal right now in the financial world and many large banks have announced a pilot to start storing data on the Ethereum Blockchain.

Emergency Crypto Meeting in South Korea. South Korea is by far the largest buyer of cryptocurrencies. Updates about what will happen in this meeting on Friday are sure to move the markets.

Have an awesome 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.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Market Overview

Asian Market Update – Wednesday: Coins fall back after strong rally; Asian stocks mixed ahead of Fed decision

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Falling

Litecoin surged 60 percent on Coinbase, but other exchanges are lagging behind

The main cryptocurrencies took a hard hit on Wednesday morning in Asia, after strong gains the day before.

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On Coinbase, bitcoin fell 4.79 percent to $16,880 at midday in Asia. The virtual currency had a nice run on Tuesday before erasing nearly all gains for the day on Wednesday morning.

Though investors are optimistic that bitcoin could hit the $20,000 mark any time soon ahead of more futures markets being launched next week, some government officials in South Korea and Australian appear to be very skeptic about the rise of bitcoin.

In Australia, the head of the country’s central bank, Philip Lowe, said that bitcoin rise is a “speculative mania” and that it was more of a payment method for the black or illegal economy. In South Korea, the government said in a statement on Wednesday that it will consider taxing capital gains from cryptocurrency trades, though this is something many other countries are already practicing.

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Ethereum fell sharply on Wednesday morning, after a solid upswing on Tuesday. At midday in Hong Kong on Wednesday, the cryptocurrency was down 5 percent to $646. On Tuesday, ethereum posted a gain of more than 32 percent to hit a record high of $686.

Litecoin also lost about 6 percent to $325 on Coinbase Wednesday morning. Litecoin made headlines across the crypto world of on Tuesday after an extreme surge on Coinbase of over 60 percent in a single day.

There are now significant price differences between Coinbase and other exchanges on the LTC/USD pair. While litecoin has been gaining across the board, no other exchanges have come close to the prices seen on Coinbase over the past few days.

Main Market Movers – Mid-day Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 22,697 -0.73%
China-Shanghai Composite Index 3,276 -0.12%
Hong Kong –Hang Seng 28,884 0.31%
South Korea-KOSPI 2,478 0.71%
Australia-ASX 200 6,008 -0.08%
S&P 500 E-Mini Futures 2,661 -0.27%

Major Asian equities were in mixed mode on Wednesday morning, as investors were waiting for an interest rate decision from the US Fed later in the day.

Overall, markets were down in Japan, the Chinese mainland and Australia, while indexes were pointing slightly higher in Hong Kong and South Korea.

the S&P 500 E-Mini Futures was off 0.27 percent at 2,661 at midday on Wednesday.

In Hong Kong, the Hang Seng Index edged up 0.31 percent to 28,884 at midday.

In South Korea, the Kospi was 0.71 percent higher to 2,478 at midday. Positive news regarding North Korea came out of Washington on Wednesday, when US Secretary of State Rex Tillerson indicated that the US is ready to talk with North Korea.

In Japan, the Nikkei 225 Index lost 0.73 percent to 22,697 at midday.  A debate on the BOJ’s monetary policy next year is ongoing, but the latest news reports suggest the central bank is likely to keep rates low.

On the Chinese mainland, the Shanghai Composite Index was off 0.12 percent to 3,276.

Down under, the ASX 200 was down 0.08 percent to 6,008 at midday.

The US Fed is scheduled to conclude its two-day policy meeting on Wednesday, and markets are cautiously waiting for any clues of the Fed’s decision on interest rate hikes. If the Fed indicates a more hawkish tone, it would likely put pressure on emerging markets equities and currencies.

Currencies

The Japanese yen firmed 0.26 percent against the US dollar at midday Wednesday, changing hands at 113.26 per dollar.

The Chinese yuan gained 0.04 percent against the US dollar at 6.6183 per dollar.

The Australian dollar firmed 0.29 percent on the dollar, changing hands at 1.3195 per dollar at midday.

Commodities

WTI Oil was up 0.14 percent to $57.51 per barrel.

Brent Crude edged up 0.16 percent to $63.92 per barrel.

Gold was down 0.01 percent to $1,244 an ounce.

News across Asia

In China, Google Inc. announced in Beijing on Wednesday that it would open an artificial intelligence (AI) research center in China, which it said would be the first of its kind in Asia.

Take away: With laser-like focus from the Chinese government on AI, Google is trying to tap into China and get ahead in what could be a game-changing technology that has a wide range of applications.

In Japan, Reuters reported on Wednesday that the Bank of Japan is set to keep an assumed interest rate at a record low of 1.1 percent. The central bank has been keeping its rates low and in turn borrowing costs low, albeit missed inflation targets and signs that the economy is improving.

Take away: There are different voices within the BOJ, where some are pushing for an end to ultra-easy monetary policies, while others are advocating for a continuation of those polices.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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Bitcoin

Is Bitcoin Stealing Gold’s Luster?

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It may still be too early to gauge Wall Street’s attitude towards bitcoin but so far the sentiment we’re seeing is extreme caution.

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Yesterday, the CBOE’s new contracts saw just 411 coins traded, which comes out to about $7.3 Million, or about 0.062% of the total amount traded on the world’s largest exchange sites.

The SEC financial regulator in the United States has now issued a warning on cryptotrading and especially on ICOs saying what most of us in the industry already know. If something looks like a scam and smells like a scam, it probably is one.

Furthermore, by calling something an ICO it does not change the underlying nature of the asset itself. If a company is offering a token that acts as an investment in the success of that company, it still falls under the jurisdiction of the same regulations as any other financial asset.

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We can expect them to continue to crack down on specific companies who have intentionally tricked investors in this space as they probably should have been doing right from the start.

In today’s update, I’d like to explore with you the relationship between the world’s newest financial asset and it’s oldest most established store of value. Please keep an open mind as I’d love to hear your opinion after you read it.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

Oil & Ice in London

Bitcoin Replacing Gold?

Some Data and a Question

Please note: All data, figures & graphs are valid as of December 12th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Stocks in the United States climbed further yesterday nearing all-time record highs powered by advances in tech stocks and the energy sector.

The UK’s main North Sea pipeline has been shut down for repairs due to a hairline crack and will likely be out of commission for a couple weeks. There’s a yellow weather warning out in London telling residents to prepare for ice.

The combination of greater demand and less supply has sent the price of oil up in the UK but even the West Texas Instruments oil that is traded at eToro is seeing a significant surge toward the highs.

The price of oil has been rising steadily thanks to efforts from OPEC to reduce the global glut. Still uncertain, how US oil producers are going to react to all this.

Stock markets in Asia did not continue New York’s sentiment and the China50 index fell 1.8% today. The European markets are opening just now but looking rather flat.

In addition, we’re seeing a notable risk-on sentiment in the currency markets, with the safe haven’s (USD, JPY), and Euro) down and the risky currencies gaining in comparison.

What about Gold?

Normally, we would look to gold to understand investor attitude towards risk on any given day. After thousands of years of acting as a store of value and a solid place to keep your money in times of crisis, it has forged a sturdy relationship with other assets and served as the main barometer for risk sentiment.

Indeed, with the markets showing risk on today, we do in fact see gold taking a dive. However, what’s more interesting to investors at the moment is gold’s relationship with bitcoin.

An analyst on from ACG on CNBC yesterday made the claim the bitcoin was stealing some of gold’s market share, saying the the crypto-market is now standing at about 23% of the liquid “tradeable” gold in the market.

Seemingly in response, an analyst from Goldman Sachs was quoted in the Financial Times as saying that this is not happening and that the markets remain unconnected.

Let’s take a look at some charts

Over the last few weeks, we can spot a rather clear reverse-correlation between the two assets with the chart creating a rather large X as bitcoin surges and gold declined over the same period.

but the most interesting thing that I’m seeing is actually what’s happened in the last 20 hours or so. Here, take a look at this snapshot.

Of course, it’s a very small amount of data, but at least from 16:00 yesterday afternoon bitcoin and gold are trading in a lockstep mirror image.

Deeper in the data

In eToro, it’s no secret that we’re seeing a lot of new customers mainly thanks to the rise in populist finance surrounding the cryptocurrencies. I’d like to take this opportunity to welcome everybody, I hope you’re enjoying the platform so far. 🙂

After an extensive conversation on the above question with one of our senior officers in the trading department. It seems that what we’re seeing in eToro is actually a trickle-down effect.

Meaning, yes. We’re seeing volumes on bitcoin going through the roof but the volumes on gold are rising as well. Of course, this is only an initial finding and we’ll need to pour into the data a bit further later on, but it seems that the volumes that we’re seeing on gold so far this year have more than doubled what we saw last year.

In comparison, we are also seeing increases in the volumes of Oil and the Euro Vs the US Dollar but the increase on these assets is not as much as the increase that we saw in gold.

This indeed could be a remarkable find in behavioral economics. Similar to when a new Pizza Shop opens up just down the street from an established one. It would seem initially that they would now need to fight over market share but in fact, as the awareness grows so does the hunger for investments and in fact, both end up benefiting as a result.

As this is only my personal view from where I sit. I do believe that this question is more of an emotional one that should be put to the general public and not one to be answered by financial analysts such as myself who may be already stuck in a certain way of thinking.

If you have a moment, please reply on this post either by Email, or with a comment below (depending where you see it), or just tag me on social media with your thoughts and opinions.

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 money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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