Bitcoin rally has been driven by banking crisis, and two more factors: strategist
It is, of course, an extremely volatile resource, but at the time this story was prepared, bitcoin
BTCUSD
was up an amazing 69% (nice) this year. Gold
GC00
— analog bitcoin, if you will — has gained 11%, while the S&P 500
SPX
has progressed by 7%.
There is a logical basis behind both bitcoin and gold’s appreciation: problems in the traditional banking system, which to date has seen the collapse of SVB Financial, Signature Bank and Silvergate Bank and a systemically important institution, Credit Suisse, handed over to UBS. The 12% share price drop in Western Alliance Bancorp
WAL
on Wednesday, after the lender did not disclose deposit outflows, appearing to indicate that the crisis is not entirely over.
“For crypto supporters, the US banking crisis exposed the weaknesses of the traditional financial system, given that banks’ maturity mismatches are prone to bank runs,” said Nikolaos Panigirtzoglou, global market strategist at JPMorgan. “Crypto proponents have long argued that the crypto ecosystem is superior, not least because deposits are held in entities such as stablecoins which, as a digital form of money market fund, are 100% backed by high-quality liquid assets and are thus less prone to run.”
But Panigirtzoglou also notes two other supports, which are not as well known. He talks about the launch of bitcoin ordinals, which enable non-fungible tokens, or NFTs, directly on the bitcoin network. “This is because metadata such as text, images can be written onto the bitcoin network itself, without relying on smart contracts as seen with other blockchains, where NFTs are created through smart contracts,” he says. If there is a boom similar to the recent NFT bull run, transaction fees could be driven higher, which would increase miners’ earnings.
And he looks forward to an event next year – in April 2024, when bitcoin will be halved, as it happens once every four years. Like stock splits, it can have a positive impact despite not really changing anything. “While this is far from ceteris paribus, this would mechanically double bitcoin’s production cost to around $40k, creating a positive psychological effect. This is because bitcoin’s production cost has historically acted as an effective lower bound,” he says.
The previous halving events, in 2016 and 2020, were accompanied by a bullish trajectory afterwards.
The market
US stock futures were mixed, with Dow futures
YM00
slightly higher while the Nasdaq 100 contract
NQ00
was lower. The return on the 10-year treasury
TMUBMUSD10Y
was down for a seventh session in a row.
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The uproar
Weekly jobless claims are due to be released, the last indicator before the non-business payrolls report on Friday, when stock markets will be closed for the Good Friday holiday.
A judge denied an attempt to speed up the resolution of a shareholder battle over AMC Entertainment
AMC
ability to convert its so-called APE
MONKEY
shares to ordinary shares.
Costco Wholesale
COST
reported its first monthly same-store sales in nearly three years.
Britain’s competition regulator said it is assessing whether Amazon.com is
AMZN
$1.7 billion deal to buy iRobot
IRBT
will reduce competition, a step before starting a formal investigation.
French President Emmanuel Macron visited China and met with Xi Jinping, while at home protests continued over his plan to raise the retirement age by two years.
The best from the web
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Top tickers
Here were the most active tickers on MarketWatch as of 6 a.m. Eastern.
| Ticker | Security name |
|
TSLA |
Tesla |
|
AMC |
AMC Entertainment |
|
BBBY |
Bed Bath & Beyond |
|
GME |
GameStop |
|
MONKEY |
AMC Entertainment prefers |
|
BID |
Anheuser-Busch InBev |
|
NVDA |
Nvidia |
|
AAPL |
apple |
|
MULN |
Mullen Automotive |
|
NINE |
Nine |
The diagram
Friendshoring is a real thing, economists from the International Monetary Fund conclude. Over the past decade, the share of foreign direct investment flows among geopolitically aligned economies has continued to rise, more than the share for countries closer geographically, the IMF says. As long-term flows fragment, the IMF estimates a drag on global output of close to 2%.
Random reading
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