As always, thanks for reading this Wednesday’s edition of Overbit News. Today we’ll look at traditional markets and how they are reacting to international news like vaccine progress and Brexit developments, whilst Bitcoin and the rest of the cryptocurrency stall out right below all-time highs – perhaps awaiting a catalyst.
In our last edition, we mentioned how the lack of stimulus developments in the US weighed on the global risk appetite, even despite the good news on the Covid front. Well, it seems the good-tides of Covid-19 vaccine progress have not outweighed the bad news of politicians fighting, at least temporarily.
These infights have sent investors back out the US dollar and into its counterparts, with traditionally very-risky forex pairs like the Australian and New Zealand dollars near their most substantial levels since 2018. As one ING analyst succinctly put it: “The dollar is starting the week on the backfoot as risk appetite remains fairly upbeat on the back of vaccine roll-out news, lingering hopes around a US fiscal stimulus package and some optimism on Brexit negotiations,” they said in a note to clients.
To speak more of the ongoing Brexit negotiations, the British Sterling seemed to fare very well in a risk-on type of day in the markets, with the Pound rising more than 1% after a yet-another story is delivered of continued, renewed Brexit negotiations.
According to Reuters, the Pound outperformed both the US Dollar and the Euro; “the pound traded 0.9% higher to the dollar at $1.3338, having risen as much as 1.6% to $1.3444 earlier. Against the euro, it was 0.7% higher at 90.94 pence per euro.”
It seems that the market gloom and doom surrounding Covid maybe dissipating, as investors seem to be betting towards a brighter future. Whilst this is a more-than welcome sign for the markets, it’s important to remember how the ending of this pandemic may affect the markets – in particular commodities.
Commodities, and their potential future, brings us to our last topic of the day. On Monday, 14 December, US Gold and Silver prices started the week off lower. According to Kitco, “February Gold futures were last down $14.70 at $1,828.80, and March Comex Silver was last down $0.122 at $23.97 an ounce.” It seems that this recent flip in risk preference has created some selling pressure for precious metals, which are often seen as ‘safe-haven’ assets. Looking forward, February gold futures seem to be somewhat split, but the bullish momentum does seem to be weakening.
Some might be wondering, where does this leave Bitcoin for the future? Will it underperform once the pandemic ends?
It might be wise to not lump Bitcoin in with Gold and other precious metals, as there is quite an argument for major bullish catalysts on the near-horizon for Bitcoin.
Per Forbes reporting, JPMorgan says Bitcoin faces a $600 billion catalyst. After the insurance giant Mass Mutual invested a small fraction of their holdings into Bitcoin, JPMorgan seemed to evaluate the implications.” According to a note from JPMorgan strategists including Nikolaos Panigirtzoglou, a 1% allocation from pension funds and insurance firms in the US, eurozone, UK, and Japan would amount to $600 billion.
In other words, they think significant additional funds will follow suit and invest their holdings, at least 1% or so, into Bitcoin. Such a massive, worldwide buy-in would be nearly double the existing Bitcoin market cap itself, illustrating just how much room BTCUSD has to grow.
As the situation continues to unfold, Overbit.com News will continue to keep you updated on the global markets, and as always thank you for reading.