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Week in Review

Week in Review: Crypto Market Sheds Hundreds of Billions, Trump Signs $1.5 Trillion Tax Cut

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The week before Christmas delivered huge developments in the global financial markets. On the policy front, U.S. President Donald Trump officially signed new tax legislation after both chambers of Congress approved $1.5 trillion in tax cuts. Wall Street largely shrugged off the news as trade volumes plummeted before the holidays.

In the world of cryptocurrency, bitcoin and dozens of altcoins underwent a massive correction that shaved roughly $190 billion from their combined market cap. The market would later recover despite trading well off its peak.

Cryptos Suffer Major Decline

Cryptocurrencies just posted their biggest-ever correction on Friday, with the market shedding 30% in a matter of hours. At its lowest point, the market cap for all cryptocurrencies fell to roughly $418 billion. That represents a decline of $232 billion from the recent peak of $650 billion.

There were no immediate catalysts for the price collapse, but it appears that the altcoin universe continues to track closely with bitcoin. The world’s most traded cryptocurrency briefly traded below $12,000 on Friday before paring its losses later in the day. Prominent altcoins such as Ethereum, Litecoin, IOTA, Dash and bitcoin cash all posted double-digit percentage losses. Ripple XRP also fell, but managed to reverse losses later in the day.

At press time, global cryptocurrencies are collectively valued at roughly $542 billion, according to CoinMarketCap.

The decline in cryptos was associated with a large drop in bitcoin futures. Data from both CBOE and CME showed that all contracts expiring in the first quarter of 2018 are falling more than 20% Friday. In particular, CME’s January contract reached the circuit breaker at $12,265. A circuit breaker is triggered when a financial asset falls too far, too fast.

President Trump Scores Major Legislative Win

President Trump officially signed the new GOP tax bill on Friday, delivering huge tax cuts to corporations and a temporary overhaul of personal income taxes. Under the new spending measure, the corporate tax rate will be reduced to 21% from 35% and individual tax rates will be cut across the board.

“I consider this very much a bill for the middle class and a bill for jobs,” Trump said in the Oval Office before signing the new bill. “Corporations are literally going wild over this. I think even beyond my expectations.”

The new legislation will reduce federal revenue by nearly $1.5 trillion over the next ten years, although individual tax cuts are scheduled to expire in 2026 to avoid inflating the deficit in future years. The Trump administration says tax cuts will stimulate faster economic growth, which will more than offset the lost revenue.

Wall Street Heads for Fifth Straight Weekly Gain as Europe Slumps

U.S. stocks rounded out their fifth straight weekly gain even as trade volumes thinned ahead of the holidays. The benchmark indexes rose to fresh records on Monday before paring gains later in the week.

The large-cap S&P 500 Index closed down 0.1% on Friday, but still managed to gain 0.3% for the week. The index settled at 2,683.34.

Wall Street has been on a tear all year long on expectations the Trump administration will implement much-needed reforms to reduce taxes and stimulate growth. With tax reform out of the way, investors will be keen to monitor President Trump’s push for infrastructure spending and regulatory reform in the coming year.

European stocks struggled throughout the week, eventually settling lower amid signs that Spain may be headed for another regional crisis involving Catalonia. Parliamentary elections this week handed Catalonia’s separatist movement a clean victory, sparking fresh fears of renewed tensions with Madrid. Spain’s Ibex 35 plunged 1.2% on Friday. The Euro Stoxx 50 index declined 0.5% Friday to finish lower for the week.

North American and European markets will be closed on Monday. Most European markets will remain closed Dec. 26.

The Week Ahead

For crypto investors, the biggest question heading into next week is whether the most recent correction will continue. If history is any indication, investors are keen on buying the dips.

Equities will experience lower trade volumes after Christmas, with the ‘Santa Claus Rally’ likely to underpin the market in the final week of the year.

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 462 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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Week in Review

Week in Review: Cryptocurrency Market Extends Collapse with $60 Billion Decline but SEC Provides Silver Lining

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The cryptocurrency market plunged by as much as 21% this week in an apparent selloff that was driven by volatile futures trading. Negative headlines concerning Tether price manipulation, a South Korean exchange hack and widening investigation by CFTC regulators all hastened the collapse as cryptos approached their lowest levels since February.

However, a top official with the U.S. Securities and Exchange Commission (SEC) gave investors something to cheer about by concluding that Ethereum is not a security. Meanwhile, a government-appointed panel in India is expected to challenge the central bank’s unilateral ban on digital currency trading, according to multiple reports by local media.

Cryptocurrency Market Plunges

Cryptocurrencies bled more than $60 billion over the past seven days, as the market approached the February bear-market low. The declines were largely concentrated in the first half of the week as investors reacted to a security breach of a South Korean exchange and news of a widening investigation by CFTC officials into bitcoin futures.

While these factors certainly played a role, the main culprits of the decline appear to be volatile futures trading and the gradual exit of long-term holders from the market.

According to crypto analyst Tom Lee, traders are longing bitcoin and shorting the futures contract to generate profits before the expiry of the monthly contract. This works by selling a large share of holdings in the futures market at a volume weighted average price, and then selling the remaining amount during expiration.

On the other side of the spectrum, a lack of new buying interest is keeping the supply of bitcoin elevated. Based on Google search trends and overall trading volumes on major exchanges, the influx of new buyers is the lowest it has been this year.

Research carried out by Chainanalysis also suggests that long-term holders of cryptocurrency are gradually unwinding their positions, possibly due to frustration, tax requirements or other factors. The researchers said bitcoin’s long-term backers sold about $30 billion worth of digital currency between December and April.

Bitcoin bottomed near $6,100 this week but has since recovered to around $6,700. Some analysts believe that a bigger reversal is in play, possibly exposing new lows of around $5,000.

Bitcoin, Ethereum Not Securities by SEC Standards

A high-ranking official at the U.S. Securities and Exchange Commission (SEC) has publicly stated that Ethereum is not a security, ending months of speculation that the world’s second-largest cryptocurency would fall under the purview of federal regulators.

Speaking at the Yahoo cryptocurrency summit in San Francisco on Thursday, corporate finance director William Hinman issued the following statement:

“Based on my understanding of the present state of ether, the Ethereum network and its decentralized structure, current offers and sales of ether are not securities transactions.”

Although the statement doesn’t reflect the SEC’s official position on the matter, the regulator’s view of Ethereum likely falls in line with its approach to bitcoin, which it says is too decentralized to be a security. Likewise, Ethereum is not a security because its network is too decentralized.

On the subject of tokens, however, the SEC has an entirely different view. SEC Chairman Jay Clayton believes all initial coin offerings (ICOs) should be classified as securities. Hinman offered a more nuanced approach Thursday by acknowledging that some ICOs can be structured like a consumer good rather than a security.

Nasdaq’s Record Surge

U.S. stocks headed for another week of gains, as pro-growth optimism and the easing of geopolitical tensions spurred demand for riskier assets. The technology-driven Nasdaq Composite Index continued to outperform the market by notching its fifth record close in two weeks.

Wall Street has now vastly outperformed its global peers over the past month, with the major indexes returning between 1.2% and 4.9%. European and Asian markets are virtually all lower over the same period.

A successful meeting between President Trump and North Korea’s Kim Jong-un Tuesday helped reassure investors that diplomacy would prevail in Washington’s attempt to denuclearize the Communist state. Trump and Kim issued a joint statement following the meeting where they pledged to continue negotiations.

Central Banks in Focus

Monetary policy was a primary focus this week as investors monitored central-bank meetings in Washington and Riga.

The U.S. Federal Reserve voted Wednesday to raise the target for the federal funds rate to 2% in a decision that was widely expected by markets. In doing so, policymakers dropped neutral language about the economy and priced in two more rate adjustments this year.

The European Central Bank (ECB) kept monetary policy unchanged Thursday but vowed to wind down its crisis-era stimulus plan this year. ECB officials said they are planning to end monthly bond purchases by the end of the year.

ECB President Mario Draghi vowed to cut quantitative easing from the current rate of €30 billion per month to €15 billion beginning in September. The program will come to a full stop in December.

However, by urging caution, the ECB struck a dovish tone in the currency markets, triggering a landslide in the euro and sending the U.S. dollar to its highest level of the year.

The Week Ahead

Fallout from crypto carnage will be top of mind for digital currency traders next week. It remains to be seen whether the recent lows will attract bargain hunters or keep potential buyers out of the market indefinitely. As a benchmark, trading volumes during the April rebound averaged between $20 and $30 billion. Daily market turnover is now struggling to break $15 billion.

On the economic calendar, the Bank of England and Swiss National Bank are scheduled to deliver their next policy edicts June 21. Fed Chairman Jerome Powell is also scheduled to speak publicly next week following the central bank’s decision to raise interest rates on Wednesday.

European Central Bank (ECB) President Mario Draghi will also deliver multiple public addresses after his Governing Council vowed to put an end to crisis-era policy by the end of the year.

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 462 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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Week in Review

Week in Review: Where’s the Volume? 

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It has been a slow grind higher for cryptocurrency prices. After four consecutive weekly declines, the market is showing signs of recovery, though tepid trading volumes are limiting gains across the digital asset class.

The stock-market picture brightened this week, as tech shares led the Nasdaq Composite Index to three consecutive record highs.

On the the political front, leaders from the Group of 7 nations touched down in Quebec, Canada on Friday for the first of a two-day meeting that could exacerbate growing trade tensions between the United States and its allies.

Cryptocurrencies Stabilize in Low-Volume Trade

Digital currencies stemmed losses this week, as bitcoin avoided a major technical reversal and the major altcoins stabilized following a month of volatility.

The total value of all cryptocurrencies rose by $15 billion over the past seven days, the first weekly gain in over a month. At the time of writing, the total market was valued at $342 billion.

Bitcoin successfully defended the $7,000 support level as the world’s largest cryptocurrency recovered near $7,600. The bulls are now eyeing a breakthrough of the $7,800 resistance for confirmation of further upside.

Among the majors, EOS and bitcoin cash were the biggest weekly gainers. Each currency added double digits compared with seven days ago.

Despite the gains, the crypto-market uptrend was severely limited by declining trade volumes. Daily market turnover ranged between $14 billion and $18 billion all week long, according to CoinMarketCap.

A Record-Setting Week for the Nasdaq

The technology sector carried the U.S. stock market higher this week, with the Nasdaq Composite Index notching three consecutive record closes.

Tech shares continue to outperform the broader market by a wide margin. The S&P 500’s information technology index has returned 13.5% this year, compared with 3.6% for the broader market.

The CBOE Volatility Index, commonly known as the VIX, touched its lowest level in over four months as calm returned to Wall Street. However, that optimism could be short-lived as the Federal Reserve eyes multiple interest rate hikes in the second half of the year.

G7 Summit Begins

Protests were underway Friday morning in Quebec as leaders of the powerful G7 nations began their two-day meeting.

U.S. President Donald Trump is outnumbered on key issues ranging from trade to environmental policies. Those differences came to light in a Twitter spat between Trump, French President Emmanuel Macron and Canada’s Justin Trudeau.

“Please tell Prime Minister Trudeau and President Macron that they are charging the U.S. massive tariffs and create non-monetary barriers. The EU trade surplus with the U.S. is $151 Billion, and Canada keeps our farmers and others out. Look forward to seeing them tomorrow,” Trump tweeted on Thursday.

In a follow-up message, Trump called Prime Minister Trudeau “indignant” by invoking Canada’s long-standing relationship with the United States while failing to acknowledge the country’s unfair trade practices.

Trump will depart the G7 meeting early Saturday and quickly shift his focus to North Korea.

The Week Ahead

President Trump and North Korea’s Kim Jong-un will meet in Singapore on June 12 for high-level talks on denuclearization. The historic face-to-face meeting could signal the beginning of bilateral talks between the two adversaries in pursuit of a comprehensive peace treaty for the Korean peninsula.

On the same day, the U.S. Federal Open Market Committee (FOMC) will kick off its two-day policy meeting in Washington. On Wednesday, the Fed is widely expected to raise the benchmark interest rate for the second time this year. The official rate statement will be accompanied by a revised summary of economic projections covering GDP, unemployment and inflation.

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 462 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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Week in Review

Week in Review: Cryptocurrencies Show Signs of Stabilizing; Trade War Roils Global Markets

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Fresh off their fourth consecutive weekly decline, cryptocurrencies have shown signs of stability in recent sessions, as bitcoin avoided a major technical breakdown and Ethereum recovered from a two-day dump at the hands of EOS. Although rally attempts are building, unusually low trading volumes are keeping the bulls at bay for the time being.

A fresh Italy crisis and the threat of trade war between the United States and its allies weighed heavily on traditional markets, with stocks ending lower for the week.

Crypto Markets Stabilize

Despite being another down week for cryptocurrencies, the market has stabilized over the last three days as bitcoin and the major altcoin

The cryptocurrency market shed about $5 billion this week, although the major altcoins pared earlier declines.

Cryptos bottomed near $303 billion on Monday but have since recovered nearly $30 billion in market cap. Bitcoin and Ripple were virtually unchanged week-over-week while Cardano and IOTA surged.

Among top-25 cryptocurrencies, IOTA was this week’s best performer thanks to a highly anticipated beta release of the Trinity Mobile Wallet.

With the latest slump, cryptocurrencies are down more than $140 billion from their most recent swing high. Trading volumes have declined significantly over the past month, culminating in a fresh six-week low last Saturday.

Trade War Rattles Markets

The Trump administration confirmed Thursday it was moving ahead with its plan to tax commodity imports from Canada, Mexico and the European Union (EU). The news triggered a flash exodus from equity markets in line with the post-Memorial Day drop just two days earlier.

Stock markets from New York to London ended mixed-to-lower for the week as protectionist rhetoric weighed on investor sentiment. As a general rule, markets are averse to protectionist policies that could restrict the free flow of goods. That said, the S&P 500 Index finished in the week in positive territory thanks to  strong showing Friday.

Global equity markets ended the week on a positive amid news that Italy had avoided a major political crisis (more on that below).

Italy Gets Anti-Establishment Government

After being denied the ability to form government, Italy’s two main anti-establishment parties succeeded Thursday in forming a unified bloc headed by a political newcomer.

The realization of an anti-establishment government headed by Five Star and the League means Italy will not require a new round of elections this year. New elections appeared to be a foregone conclusion after President Sergio Mattarella vetoed a Euroskeptic economist from heading the country’s economy ministry, sparking Italy’s biggest political crisis since the Second World War.

Mattarella’s rationale for blocking the appointment of Paolo Savona was to “safeguard the personal savings of Italian citizens,” which he believed would have been adversely affected by a Euroskeptic minister. For many, the president’s veto was a clear obstruction and a strong sign that Brussels was in control of Italian affairs.

The Week Ahead

June is a pivotal month on several fronts: President Trump will meet North Korean leader Kim Jong-un, the Federal Reserve will in all likelihood raise interest rates and negotiations on free trade will continue. For the likes of John McAfee, the cryptocurrency market will put its rally cap back on in the coming weeks.

Crypto bulls have maintained their bullish outlook in light of the recent downtrend. Fundstrat’s Robert Sluymer believes bitcoin has found its bottom with its recent correction and that prices are poised to continue higher in the near term.

This view was also expressed by Dan Morehead, founder of Pantera Capital Management. In a recent interview with CNBC, Morehead said investors should buy into bitcoin while it’s still cheap.

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 462 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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