Cryptocurrency markets added another $22 billion in value over the last week, as all eyes are on the Bitcoin “halving.” Traditional markets rallied this week, being fueled by faster than expected economic recovery, despite 33 million unemployment claims the last 7 weeks.
Cryptocurrency Markets
Cryptocurrency markets added another $22 billion in value the last 7 trading sessions. Over the last month, crypto market value has grown nearly $60 billion. Over the last week, despite everyone focusing on the Bitcoin halving, NEO was the top performer – surging nearly +19%. Aside from NEO, Cardano, and Tron, most altcoins grew at a fraction of Bitcoin the last week. Going into the 3rd Bitcoin halving, Bitcoin dominance sits at 67.6% and total cryptocurrency market capitalization sits around $270 billion.
Bitcoin Halving
With Bitcoin halving taking place in 3 days, many investors will anxiously await next week’s trading session. Many investors would argue that the 3rd halving is occurring at the perfect time. With the Federal Reserve creating “demand pull inflation”, many investors see inflation being a near term issue within traditional markets. Bitcoins 3rd halving is a milestone because its annual inflation rate will hover around 1.8%. As outlined in a previous article, the average global annual inflation is right around 3.56%. With inflationary pressures surfacing all over the globe, Bitcoins infrastructure isn’t going unnoticed. This week, hedge fund billionaire Paul Tudor announced that he took a position in Bitcoin. He believes that Bitcoin will be the best inflation hedge. Paul said that Bitcoin right now reminded him of Gold in the 1970s.
Bitcoins Price Performance
Bitcoins price continues to outperform during unprecedented times. Despite traditional markets rebounding this week, Bitcoin is still outperforming all major indices. Bitcoin is witnessing a milestone in that it’s outperforming nearly every asset class during financial turmoil that we haven’t seen in over a decade. As Bitcoin’s infrastructure continues to evolve, we now enter a time where billionaire investors are on-boarding the asset class due to long-term economic outlook.
Bitcoin Vs Large Stocks Year To Date
Traditional Markets
Stocks surged this week fueled by technology and energy sections. All major indices turned positive on the week as oil was the clear outlier, recovering nearly +25%. Stocks now sit about -14% lower from pre COVID-19 highs. Despite the unemployment rate hitting ( 14.7% ) this week, stocks continue to surge due to optimistic outlook.
Recovery Outlook
Traditional markets were directly uncorrelated to economic news this week. As the labor market worsened, markets rallied on future outlook. The catalyst seemed to be that nearly 80% of unemployment was labeled as “temporary” opposed to “permanent.” If we go back to the last recession of 2008/2009, most of the jobs lost were in fact labeled “permanent.” With this being said, the market is seeing opportunity for faster than expected recovery. Many of the previous recessions the U.S faced resulted in nearly 12-14 month recovery phases. The outlook now seems to be much more optimistic based on the approach the government has taken. In 2008 for example, there wasn’t this type of financial stimulus being injected into the American people. With nearly 70% of the U.S GDP revolving around consumer spending, the financial stimulus has given the economy a faster track to recovery. Without the Fed injecting $3+ trillion to preserve payrolls, it’s quite frightening to imagine the economy right now. This aid has given companies the ability to keep employees on the payroll, which should ultimately result in faster recovery compared to previous recessions. Previous recessions ( 2008/2009) witnessed nearly 5+ year recovery phases to cut unemployment in half because there wasn’t this type of financial support in circulation.
Not Close To Over
Despite the market being optimistic on the recovery phase, we are nowhere near recovery. Many analysts have shut the door on 2020 and continue to focus on 2021. With states opening up in “phases”, the economy will take a while to recover. Many argue that March lows will be retested once the market sees the true impact on the economy, especially the impact to small businesses. With the Fed increasing their balance sheet to $6.7 trillion and keeping interest rates at nearly 0, it seems as if they plan to keep on injecting stimulus while states try to gradually reopen.
In addition, the reopening of the economy will face its biggest challenge as flu season rolls around. States like Ohio are seeing continued COVID-19 cases as they reopen. Without a vaccine, this is a calculated risk the Trump administration is taking. With the importance of opening up the economy, many risks still surface regarding “opening up too soon.” With flu season around the corner, it’s anyone’s best guess what the future holds. If COVID-19 witnesses its 2nd wave during flu season, it will be a rollercoaster environment.
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