THRILL RIDE: BITCOIN'S EXTRAORDINARY FALL
Bitcoin's extraordinary fallBitcoin hit a new two-month low on Friday, breaking out of its recent narrow range amid a wave of negative sentiment sweeping global markets.
Bitcoin fell 7.2% last Thursday, the biggest one-day drop since November 2022, when the leading FTX exchange collapsed.
It then fell to a two-month low of $26,172 in Asian trading on Friday, the lowest since 16 June.
A wave of sell-offs gripped global markets, with major Wall Street indexes closing lower on Thursday and Asian stocks starting a third week of losses due to concerns about the health of China's economy and fears that US interest rates will rise longer given the economy's resilience.
Ether, the second-largest cryptocurrency, remained steady at $1,685.20, also falling sharply on Thursday.
Some analysts attributed the cryptocurrencies' fall to a Wall Street Journal report that Elon Musk's SpaceX sold its bitcoin holdings, writing down their value by $373 million. Musk is influential among crypto-enthusiasts, and bitcoin prices have previously fluctuated in response to his tweets.
Bitcoin has held near the $30,000 mark in recent months, gradually recovering this year after a sharp drop in 2022 when various cryptocurrency companies collapsed, leaving investors with heavy losses.
Cryptocurrency markets got a boost in June as BlackRock applied to launch a spot bitcoin exchange-traded fund (ETF) in the US. Some investors took the move as a sign that the US Securities and Exchange Commission would approve applications to launch a spot bitcoin ETF from various asset managers, including Grayscale.
THE SUSPENSE OVER JACKSON HOLE
Dear clients,
A sharp rise in US Treasury yields is sending shivers through risky areas of the market, leaving investors wondering how bad the damage will be to a rally that has lifted everything from equities to bitcoin this year.
Strong economic growth has fuelled expectations that the Federal Reserve will raise rates for longer, pushing Treasury yields this month to their highest level since 2007. The rise has made it harder for holders of stocks and other speculative assets to ignore their gains, which have continued for most of the year even as yields have steadily risen.
The S&P 500 index lost 4% this month as the yield on 10-year U.S. Treasuries rose to a more than 15-year high of 4.35% on Monday. At the same time, the S&P 500 technology sector fell 5.7%, bitcoin fell more than 10%, and the ARK Innovation ETF, a bastion of many high-growth companies, fell 18.5%. Stocks generally rose on Monday, with the S&P 500 index up 0.7% for the day.
Rising Treasury yields, which change inversely with Treasury bond prices, can take the gloss off speculative assets by offering investors attractive payouts on investments that are considered essentially risk-free because they are backed by the U.S. government. Rising rates also raise the cost of capital in the economy, making it harder for everyone from individuals to companies to service debt.
The most important test for markets will be the annual meeting of central bankers in Jackson Hole. On Friday, Fed Chairman Jerome Powell is scheduled to give a speech on the economic outlook.
According to the latest weekly Refinitiv Lipper data, US investors were net sellers of equity funds for the third consecutive week in the seven days to 16 August. At the same time, they were attracted by strong returns in money market funds, which attracted about $32.5bn in the past week, the largest inflows since 5 July.
Investor positioning in the equity market fell for a fourth straight week to a two-month low, according to Deutsche Bank data.
However, bets against equities have been losing ground this year. Many investors believe equities will hold strong this year, which has seen them rebound from widespread fears of recession and turmoil in the banking sector. The S&P 500 index has gained 14.6% over the past year. Goldman Sachs strategists said Monday that the volume of stocks held by retail and institutional investors is below historical norms, suggesting the bull market may have additional fuel left if the economy remains strong.
EXPLORING THE NEW NATIONAL CURRENCIES
Dear clients,
More choices never hurt and just recently FreshForex introduced new Asian and African options. This time, we'll be checking out new national currencies.
Join us on August 23 at 12:00 GMT.
During webinars, FreshForex analyst will answer your questions regarding the market situation and comment on the latest news.
If you missed the previous webinars, you can always
find them here.