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Bitcoin Rising

By Marius-Cristian Frunza
Weekly Briefs

Bitcoin’s price surged over 14% this week above the resistance level of 13 000 USD. Four years before, many analysts gave little survival chance to the leading cryptocurrency, invoking stricter regulation and anti-money laundering laws as main arguments. Why Bitcoin is still there and why we may witness another rally amid the US elections? Is Bitcoin the new investors’ Valhalla?
Paypal, announced that it is offering to its clients, wallets in cryptocurrencies. After, years of hesitation, the leading digital payment platform understood that in a world moving towards full digitalisation crypto-currencies are the future. Many neo-banks have already taken significant steps in this direction.

The foreseeable Democrats’ victory in November and the global economic situation let us think that soon taxes will increase. Moreover, the national taxation agencies would become more intrusive in individuals’ lives in order to hinder all attempts of cutting corners on tax. In this gloomy picture, cryptocurrencies could be the only options the public will have to keep a certain illusion of freedom. We could witness another wave of enthusiasm and retail liquidity in the Bitcoin market. Without talking about a 2017 déjà vu, there are many fundamental reasons to see Bitcoin rising.

Bitcoin is not anymore a blockchain protocol. It is more than this. It became a common belief, a mysticism a modern myth having its roots in the collective unconscious.

Die glorious or live long and hard. Valhalla is waiting. Viking proverb

Market overview

Two weeks are left until a crucial election in the US and less than one week until Brexit takes place. Nevertheless, the markets are very calm, and the volatility index remained at the same level since September. The leading stock indices managed to stay above their respective support levels and finished the week directionless.

Investors seem to wait anymore for the elections’ outcome, but they need to know how fast the policies of the new regime will hit the real economy. Markets may start to move significantly in January when we will learn more about the new monetary and fiscal policies. The strategists of the leading banks are embracing the agenda of the Democrat candidate, but the critical question here is how fast those policies will become a reality.

Focus:

Intel

Intel’s share lost around 10% this week after announcing the quarterly figures. The intermediary financial statements show figures below market’s expectations. Intel went through a similar dip in the summer when its share dropped by more than 20%. Both negative jumps occurred amid a strong rally of technology shares.  Why are markets penalizing Intel?

First, Intel remains the world leader in computer chips production a market which sees limited growth opportunities. The perspective on the hardware market hinders Intel’s share price.

Second, the NASDAQ rally put a value on companies surfing the wave of the digital revolution triggered by the coronavirus outbreak. Intel created a division to provide data and cloud solution, entering in direct competition with Amazon and Microsoft. The last figures showed that this division does not do as well as expected, and Intel has a hard time to sell digital products.

Therefore, Intel’s perspectives given the current context are far from looking good.

Focus:

Gilead

When the pandemic hit Europe, Redemsivir seemed the Holy Grail that could be the miraculous panacea against the new plague. Gilead, the company producing the drug saw its share rising in the early month of the pandemic. Nevertheless, since the summer, its market price is continuously declining, despite the fact, the drug got full approval in the US and is accepted for use in the EU. Redemsivir’s therapeutical results are still an object of debate, but most specialists agree is not a cure for COVD. The initial enthusiasms of investors diminished, and the liquidity went towards the companies involved in producing a vaccine.

Commodities:

Natural Gas

Henry Hub front-month contract surged since the beginning of the month after a mini-crash in September. The second wave of pandemic juxtaposed over an extended "work from home" policy of most companies impacts in a somewhat surprising way the gas demand. With many people working from home in the winter, the demand for domestic heating has good chances to surge, thereby supporting the gas prices. If the winter is colder than the average, the demand and implicitly the price could increase further.

Currencies:

Swiss franc

At the beginning of the pandemic outbreak, the US dollar and the Swiss franc were not far from parity. Since then, the US dollar lost ground to the Swiss currency, in a more visible way when compared to other major currencies. When the US accelerated the quantitative easing engine, many analysts were questioning the future place of the world's leading currency.  Moreover, the rise in the national debt level for financing stimulus packages should impact in the same shape or form the leading position of the US dollar. Other major currencies, including the Euro and the Yen, faced similar challenges as their respective central banks, printed massive amounts of monies and issued debt to avoid the catastrophic economic scenario.

Switzerland, once a major offshore hub, took a more qualified approach to deal with the economic issues relevant in the COVID matter. It is the reason why the Swiss franc got stronger since the beginning of the pandemic. Swiss franc cannot take the dollar's place as a global currency, but for sure will be seen as a safe harbour by many investors.

Market outlook

Nasdaq kept its gains from the previous week, hanging above 11,500 while the Dow Jones dwindled slightly above 28,300 points. We expect to see the leading stock indexes entering a waiting period before the US election just before beginning a bearish pattern. If the peak of the second wave comes in November than the perspective of a massive dip in January are lower.

As predicted Bitcoin’s price smashed the psychological level of 12,000 USD anticipating Biden’s victory in November. Some technical sales may occur over the next week, but in the long-term Bitcoin should move into positive territory.

General Disclaimer

The information and data published in this research were prepared by the market research department of Darqube Ltd. Publications and reports of our research department are provided for information purposes only. Market data and figures are indicative and Darqube Ltd does not trade any financial instrument or offer investment recommendations and decision of any type. The information and analysis contained in this report has been prepared from sources that our research department believes to be objective, transparent and robust.

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