Cryptocurrency markets were flat last week, maintaining total market capitalization around $259 billion. Cardano was the market outlier, running +21% last week on Coinbase rumors and positive developments coming from the Cardano Shelley Summit. Stocks rallied on better than expected employment data, despite coronavirus worsening.
Crypto market capitalization was stable last week, maintaining a total value around $259 billion. Despite being tightly correlated to traditional markets for a while now, digital assets didn’t follow traditional markets to the upside last week. Bitcoin fell -1% last week, with its market dominance hovering around 64% throughout the week. Cardano was the market outlier, surging +21%.
Bitcoin price fell -1% last week as it continues to have a difficult time building any positive momentum. Many investors were surprised that Bitcoin failed to create any positive momentum last week after news surfaced around Paypal and Venmo starting to support Bitcoin transactions. Despite this news putting Bitcoin infront of 300 million users, it appears that investors don’t see it as a catalyst yet.
Bitcoins Hash Rate
As mentioned in previous reports, Bitcoin hash rate has been important post halving. We still continue to watch Bitcoins hash rate as it continues to inch closer to the yearly high. We still believe that the next bull run could be initiated if the hash rate blows through 1 year highs. Hash rate initially dropped to December 2019 lows after the BTC halving, but it has since experienced strong upward momentum.
Bitcoin Technical Analysis
Bitcoin key support resides around $9,000 right now. From a technical standpoint this support level is very strong. If Bitcoin can’t hold $9,000, investors could very well see the digital asset sell-off to $8,000 levels. On the flip side, if Bitcoin can stay above $9,000, it will continue to eye the $10,500 resistance level in the near term. With BTC being really quiet lately, there’s no doubt that it’s setting up for a sharp move. By watching key support levels, we can get a better idea on which direction it wants to move.
Cardano – Market Outperformer
As mentioned above, Cardano ( ADA ) was the market outlier last week, rallying +21%. During a report early in June by Visionary Financial, it was reported that Cardano was gaining momentum stating that:
“Cardano’s proof-of-stake upgrade was fueling the rally. The “Shelley” protocol will essentially upgrade the network to a distributed protocol opposed to the current centralized network.”
According to the Cardano co-founder, the upgrade was expected to take place before July 7th. After the Cardano Shelley Summit last week, it was now believed the Shelley mainnet upgrade would be implemented by July 29th. After speaking more on staking, and the incoming governance layer, bullishness continued to mount in the community. In addition rumors surfaced last week around Cardano possibly being listed on Coinbase by the end of this year.
Stocks experienced positive gains last week despite having a shortened July 4th holiday week. The Dow Jones rallied +3.2% last week, with the S&P 500 returning +4%. Oil had an exceptional week as well, returning +4.6%. With better than expected jobs data, investor sentiment continued to be positive throughout the week.
In June, it was reported that 4.8 million jobs were created. This exceeded expectations and pushed unemployment down to 11.1%. Economists were originally predicting an addition of 2.9 million jobs, which the economy ultimately crushed. Despite the pandemic getting worse in select states, the states that are successfully reopening are quickly bringing back employees at much quicker rates than initially projected.
Stock Market Volatility
Stock market volatility has been all over the place in 2020. After declining -35% from February record highs, the market has been on a tear, surging +44% from the lows posted in Mach. With unemployment recently hitting 50 year lows, the market has held up exceptionally well, mostly in part to the resources deployed by the Federal Reserve during the pandemic.
Investors will continue to assess the fundamental risks that are still present. Right now the market has been focused on job creation, but many other issues could facilitate more volatility in the near term. Some of these topics include:
Worsening Pandemic: States across the South & Southwest have continued to reverse their reopening plans as cases have surged. Despite cases rising sharply, deaths have been significantly lower. This metric has kept the markets rational so far. It’s expected that data around deaths could lag around 2 weeks, meaning we could get a better idea on death metrics late next week. With 2.7 million infections nationwide and 129,000 deaths, the narrative could shift drastically if death rates starts to resurface. Last week the US reported 50,000 new cases for three days in a row. States like Florida started imposing curfews, and other states began to quarantine anybody that visits their state if they are coming from harmful states. The situation is arguably worse right now, with the low death rates being the only metric keeping everything rational.
Elections: Based on history, election season has fueled short-term volatility in financial markets. As we get closer to November, volatility is expected to elevate. Even though a Joe Biden win might not result in the abolishment of all the Trump policies, it could still affect important policies around corporate taxation and U.S/China relations.
From a macro standpoint, other risks that could impose economic threats include excessive liquidity from the Feds intervention, which ultimately puts pressure on the Fed’s balance sheet. With inflation expected to rise, this is expected to put pressure on the federal budget deficits and current debt structure.
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