Too young to fall in love

Trading Bitcoin is similar to trading stamps. You do not need to be a PhD or an MBA to figure it out. But, Sweden’s central bank realised just last week the unique nature of cryptocurrencies. When officials of central banks make negative statements about non-fiat money, investors are cinematically pulling back. So, are crypto-investors the victims of their own insecurities and fears?

The last week started well for the world’s leading cryptocurrency, as El-Salvador’s government officialised Bitcoin as legal tender. Unfortunately, what was supposed to be a glorious day for cryptocurrency aficionados, unravelled into a dismal crash. Interestingly enough, crypto investors pay too much attention to what Wall Street and central bankers are doing or saying. Therefore, Bitcoin’s price dynamic enters slowly but surely the mainstream markets narrative.  Such drift is nothing more than a recipe for disaster because cryptocurrencies aimed to provide an alternative narrative to the mainstream economic theories backing fiat currencies.

JP Morgan issued a warning note about Bitcoin’s market share falling to “uncomfortably low” levels earlier this week. They believe that Bitcoin’s recent rally results from retail investor mania as opposed to steady growth. The same logic could be applied to most NASDAQ stocks, but we do not hear much about this since the money printing machine went on turbo mode in March 2020. JP Morgan indicated that cryptocurrencies “look frothy again”, a term that created more confusion than certainty. Thus the market plunged significantly on the same day El Salvador adopted Bitcoin as official currency.

A few days later, Stefan Ingves, the governor of Sweden’s central’s banks, made a negative statement concerning crypto.  He stated that  “private money usually collapses sooner or later”.  The market reacted promptly with a significant correction amplifying the last dip and plunging Bitcoin below 45,000 UD.  This statement is relevant for central banks’ state of mind underlining their fear to lose the monopoly over currency and financial services. Moreover, Ingves added that “you can get rich by trading in bitcoin, but it’s comparable to trading in stamps". The assessment says a lot about the status-quo of bankers with regards to alternative investment. Bankers’ analysis and views are nothing more than a bundle of banalities nicely packed and sold to many blind investors. Unfortunately, Bitcoin and its followers will soon be part of this category.

Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway. Warren Buffett, American investor

Market overview

The Biden administration took supplemental measures to increase the vaccination rate of the general population. However, more than 80 million Americans have not taken the jab, exposing the vaccinated persons to unforeseen health risks. In a speech delivered to the media, President Biden underlined that the goal of this campaign is not only to curb the coronavirus infection but also to protect the American economy.

In theory, following this announcement, markets should have moved to the green zone, but precisely the opposite happened. The Dow Jones retreated well below the 35,000 mark, erasing all gains cumulated over the past weeks. Moreover, the volatility index climbed above 20, indicating that markets are getting nervous, and a pullback could be expected over the next quarter.

Focus:

Moderna

After its initial rally, Moderna’s share seemed to lose speed in August. The massive vaccination campaign in most Western countries has brought substantial revenues to the Massachusetts-based biotech firm. The low number of new infections recorded over the summer signalled that the paramedic could be soon over, thereby pushing Moderna’s share into negative territory. On the other hand, the new-Delta variant spread and the prospect of booster jabs to be required for those already vaccinated generates new sales for Moderna. Thus the company has still a lot of upside potential.

Focus:

Regeneron

We all remember the day when Donald Trump, the US 45th president, got the new coronavirus and received instantaneously Regeneron’s monoclonal antibody therapy, which was in the testing phase at the time.  Almost one year later, Regeneron’s treatment has been given emergency approval from the Food and Drug Administration for use in adults and patients aged 12 and overweighing at least 88 pounds to treat mild-to-moderate COVID infections. With more than 80 million citizens in the US only not vaccinated and perspectives of current jabs fading in efficacy over time, Regeneron’s drug could be an excellent supplemental solution for tackling the new waves of the pandemic.  Thus, its share price has a positive outlook.

Commodities:

Aluminium

You have probably never heard of Equatorial Guinea. Yet, this French-speaking West African country has one of the world’s poorest economies while being one of the wealthiest nations in terms of resources. Gold, diamonds and nonferrous metals are abundant beneath the Guinean ground.

A military coup orchestrated by the country’s elite paratroopers overturned the authoritarian regime led by the Guinean long term president Alpha Conde. The resultant political vacuum plunged the country into disarray, thereby hindering the production of bauxite, where Guinea is a world-leading supplier. Furthermore, the aluminium prices listed on LSE were already high, and the political issues from the small African country amplified the shortage leading to a foreseeable soar in Aluminium prices. Thus, after the microchips crisis, industries may be hit with a supply turmoil in nonferrous metals.

Market outlook

The Dow Jones Index ended the week into negative territory after plunging below the  34,800 resistance level.  The foreseeable market pullback is putting investors in a risky spot.

After two significant corrections, Bitcoin’s price lost over 10% hanging below 45,000, thereby losing its gains accumulated in August.

The Gold ounce suffered massive losses, going below the 1,790 mark.  Nevertheless, if the Fed's announced bonds tapering is confirmed, the gold ounce could move back into the green.