Another week of interesting developments in the Financial markets so let’s get right to it. Let’s start off with my favorite – Cryptocurrencies. Although the price action in the digital assets dictated sustained gains from last week, but we are seeing more of a consolidation pattern emerging for now. Market for the Cryptos are comfortably above the $220 billion mark at the time of writing after falling below $200 billion a number of times with the BTC dominance dropping close to the 51% mark. Looking at the Bitcoin hourly chart, it has made a couple of unsuccessful attempts at the resistance around the $6800 mark receding to the ST support zone of $6550-6600 as we speak, which it needs to hold to continue the constructive move.
I discussed in one of my previous blogs about emerging Cross-border payment systems by Ripple & IBM – JP Morgan Chase (America’s largest bank) in the meanwhile has been quietly working on a blockchain based inter-bank payment system since its pilot launch in October 2017. The Interbank Information Network (IIN) is based on Quorum – a permissioned variant of the Ethereum blockchain. It has won the support of 75 multinational banks including the recently announced Societe Generale and Santander. JPM has been testing the system with its partners ANZ, Royal Bank of Canada & Pfizer among others for more than 6 months. The intention is to have a streamlined payment system that significantly improves the efficiency of the current one in place & also to ward off the private sector competition in the shape of RippleNet & BWW. Mainstream banks have been pretty averse to the use of Cryptocurrencies, but have been more than receptive to incorporating emerging technologies like AI & Blockchain to their current systems.
Last week, it looked as if the MT reversals were taking shape in the USD Majors with the weakening of the Greenback. A couple of major incidents that took place negated that narrative. First one was FOMC‘s (U.S Central bank) hawkish rate hike, which as always has been the biggest market mover & so it did this time as well. Majors reversed course against the mighty dollar with the exception of Canadian Dollar which hangs in balance with the ongoing NAFTA negotiations. The second one was a higher than expected budget deficit presented in the Italian budget which rattled the European markets & more significantly caused EURUSD to plummet completely erasing the gains for the week before.
Before we move on, the figure above is something called a Dot Plot which the U.S Federal Reserve publishes four times a year to present their projections about the rates in the coming months & years. Each dot represents a visualization of what each member of the FOMC committee perceives as the direction where the rates are headed. Pretty evident from the recent dot plot, we are moving from neutral rates territory to a hawkish zone.
Moving on to the Equities, where there were no major shocks for the broader markets with US indices closing to smaller weekly losses except NASDAQ which still churned out a weekly gain despite the following two incidents. It’s been a rough year for both Facebook & Tesla – two huge favorites for the investors. Tesla had been holding up relatively well despite the production delays, disgruntled employees & work-related accidents, until finally, Elon Musk took to Twitter (Aug. 07) to announce that he intends to take Tesla private @ $420/share. And then all hell broke loose for Tesla, with the stock losing more than 30% of its value within a month. Musk finally announced that he had decided not to go private in the “stockholders interest” but it came a little too late for SEC which finally decided to sue Musk over that “rant”. And as expected the stock plummeted almost 15% yet again. I, for one, feel bad for the guy who has single-handedly transformed the landscape of the technological development & a sustainable future for all with his innovative ventures (Tesla, SpaceX, SolarCity, NeuraLink, HyperLoop etc). For now, though, his future at Tesla, his pioneering venture, hangs in balance.
The second story is of the social media giant – Facebook which has been in troubled waters for entirely different reasons. The problem started with the Cambridge Analytica scandal earlier in the year when the FB stock lost more than 15% of its value, but most of the investors believed it was a sound business model which presented a buying opportunity at these lower levels & it did indeed as Facebook climbed to new all-time highs – albeit the worst was yet to come. On July 25th, came the biggest value loss in U.S market history with the release of a poor guidance & decelerating growth of the social media giant. It was still reeling from this loss when an announcement came a couple of days ago of another security vulnerability that puts the data of at least 50 million Facebook users at risk. Did they learn anything from the last debacle? Is this last nail in FB’s coffin? Time will tell…
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