Pfizer's Vaccine Announcement Initiates Global Market Rally Whilst Gold and Bitcoin Slump #38
Market Meditations | November 9, 2020
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After a year of doom and gloom, many macro investors were pleased to see global markets roar after Pfizer and BioNtech revealed a breakthrough in the race for a vaccine to Covid-19. The drugmakers’ announcement that a vaccine had been found to be more than 90% effective in a late-stage trial ricocheted through asset markets that had already been rising on optimism over Joe Biden’s victory in the US presidential election. Whilst stock markets rallied, gold and bitcoin experienced a downtrend; conveying the traditional relationship between alternative investments and stock markets.
Gold, viewed by many investors as a safe place to park cash at times of uncertainty, slumped. The precious metal reached as high as $1,965 a troy ounce on Monday morning, before slamming into reverse and sliding more than 4% to $1,863. In a similar fashion to gold, bitcoin fell sharply in price following the vaccine news.
Bitcoin fell approximately $1,000 (over 6%) on the vaccine news: from $15,800 down to a daily low near $14,815. This helps to bolster bitcoin’s narrative as a hedge or non correlated assets. When the drop occurred, CryptoQuant, an on chain market analysis firm, found that whales were selling Bitcoin. When whales sell, the market often sees a strong reaction. Whether whales would begin to take profit on their shorts and attempt to resume the bull trend remains unclear. For now, the pullback has stalled with BTC recovering above $15,100, indicating a short-term trend reversal to the upside. Despite the heightened level of volatility in the market, cryptocurrency trader Cantering Clark emphasized that long-term investors are unlikely to be fazed. He said:
In addition to the factors mentioned above, my own analysis supports that the uptrend is still very much intact. A 50% retracement is healthy during an uptrend, in fact we would need to go below $14,000 for my bias to shift. So long as the trend stays intact I will be favoring longs and aggressively longing dips.
The S&P 500 climbed toward a record amid trading volume that was 160% above the 30 day average. The Dow Jones Industrial Average jumped 6%. Airlines, hotels and aeroplane makers (three industries ravaged by the collapse in travel) were among the biggest winners. In the US, United Airlines, Delta Airlines and American Airlines all rallied by more than 10%. British Airways’ parent IAG soared 38% in London, while Airbus rose 22% in Paris and Ryanair gained 11% in Dublin. InterContinental Hotels jumped 13% and Rolls-Royce, the UK jet engine market, was up 55%. Conversely, groups seen as beneficiaries of the pandemic had the opposite reaction. Hellofresh fell 17%, Ocado fell 14% and Zoom fell 16%.
In commodities, crude oil prices soared, with Brent crude rising 9% to above $43 a barrel. The virus impact on fuel demand has been the key obstacle for crude oil for the last 6 months. If the vaccine can deliver what it promises, there will be a recovery in fuel demand, sooner than the market was anticipating.
Dollar weakening is also indicative of the more ‘risk on’ sentiment. Potential for major gains for FX spot traders. Today we saw a significant decline in the value of the pound off the back of the vaccine headlines. Further reinforcing the trend since the Biden victory. We also witnessed a selling off of safe haven JPY currency.
And what’s in store for the future? We have already touched on bitcoin. As for the global markets: “The bull market has a ton of ammunition to keep going,” said Chris Larkin, managing director of trading and investing product at E*Trade Financial. “With more certainty around the election, a strong quarter of earnings across many sectors, and extremely positive news on the vaccine front, there is little to hold us back.” That’s one school of thought. Another might suggest that the response to the vaccine is overly enthusiastic. There are still considerations about regulatory approval and distribution to be considered. Whatever you think about the response to the vaccine headline, it does seem prudent to prepare for a more ‘risk on’ market in response to the Biden victory and the decent economic data we have been receiving. Where the positive sentiment has led to a slump, it has, of course, opened up opportunities to buy cheap for those interested.
Today’s Meditations:
Bitcoin’s Price Rallied During a Week of Election Uncertainty. Traders Say More Money Is Waiting on the Sidelines
Privacy Coin GRIN Is Victim of 51% Attack
JPMorgan Says Institutional Investors Appear to Prefer Bitcoin Over Gold
Trump’s Refusal to Concede and Legal Battles
Sports Fans Can Trade ‘Fractional NFTs’ Based on Real-Life Sports Statistics
Turkish Lira Rebounds After Erdogan’s Son-in-Law Quits Finance Ministry
Scan the Week
Optimizing Your Productivity With The 80/20 Principle
Bitcoin’s Price Rallied During a Week of Election Uncertainty. Traders Say More Money Is Waiting on the Sidelines. The U.S. presidential election was one of the most anticipated events in the market this year, with a lot of capital on the sidelines in order to be protected from the volatility caused by uncertainty. Bitcoin remained strong and broke upwards towards new yearly highs by the end of the week, and the S&P 500 closed strong on Friday concluding one of the best weeks since April this year. In a podcast episode with The Block Live, co-founder of Three Arrows Capital Kyle Davies said: “We saw this as a great time to go risk-on. As soon as this (election) clears, all this cash is going to be deployed.” Kyle also said that recent developments in the market indicate that this rally might have ‘legs’ that the 2017 rally to $20,000 did not. Read more.
Privacy Coin GRIN Is Victim of 51% Attack. Privacy focused blockchain network Grin was victim of a 51% attack this weekend, an event in which a miner acquires more than 50% of the network’s mining hash power and effectively takes control over the network. At the bottom of their website, Grin noted that: “The Grin network hashrate has increased considerably over a short period of time. Notably this coincides with the nicehash rate doubling in this time with well over 50% of the network hashrate currently outside of known pools. Considering these circumstances it is wise to wait for extra confirmations on transactions for payment finality. In a tweet mining group 2Miners, a chart indicated that an unknown group accumulated 57.4% of the total hash power on Saturday evening, writing that payments were stopped and wanted miners to mine at their own risk. Read more.
JPMorgan Says Institutional Investors Appear to Prefer Bitcoin Over Gold. From an institutional interest perspective, bitcoin has had a phenomenal year so far. In a recent report, JPMorgan analysts even wrote that institutional investors such as family offices might be looking at bitcoin as an alternative to gold. In a research note, reported by The Block but not available publicly, JPMorgan analysts said that Grayscale’s bitcoin trust saw positive inflows in October, compared to gold exchange-traded funds (ETF) which saw “modest outflows” since the middle of October. “This contrast lends support to the idea that some investors that previously invested in gold ETFs such as family offices, may be looking at bitcoin as an alternative to gold,” said the analysts. Grayscale’s trust currently manages $7.6 billion worth of assets in total. Read more
Trump’s Refusal to Concede and Legal Battles. Donald Trump’s refusal to acknowledge his loss in the 2020 election has fed concerns that the presidential transition would be sabotaged, as a Trump appointee refused to sign off on funding for the transition and the Trump campaign announced an expanded legal strategy in a quest to reverse the election result. In the past week alone, the Trump campaign blitzed state and federal courts with roughly a dozen new lawsuits, most attempting to halt the vote-counting process or disqualify tranches of ballots. The majority of the Trump campaign’s lawsuits were filed in Pennsylvania, Nevada, Georgia, and Michigan—states where either Biden’s margin of victory is relatively slim, or where a winner has yet to be called. Non-cooperation by the Trump campaign in the transition could slow the ability of some agencies to act on directives by Biden in essential areas such as pandemic response and the reinstatement of environmental regulations, protection for migrants and international accords. Read more.
Sports Fans Can Trade ‘Fractional NFTs’ Based on Real-Life Sports Statistics. TradeStars is a fantasy sports stocks trading game on top of the Ethereum and Matic Layer 2 blockchains. The company is tokenizing the real-life performance statistics of some of the world’s most popular athletes through a unique implementation of Fractionable NFTs — a marked change from other platforms that focus on creating collectibles of players themselves. Fractional NFT markets can be compared to the liquidity pools seen on conventional decentralized exchanges. The supply for each market is managed by a bonding curve(an automated market making algorithm) that sets the price based on supply and demand, and rewards in the form of TSX (the platform’s main governance token) are based on statistics tracking the athlete’s real-life performance. By using their sporting knowledge, and relying on their favorite real-life statistics, fans can speculate on short or long-term positions, and compete against each other in a unique social experience for a trading platform. The platform has started supporting cricket and is expected to be adding soccer and eSports NFT markets soon. Read more.
Turkish Lira Rebounds After Erdogan’s Son-in-Law Quits Finance Ministry. Turkey’s lira was set for its biggest one-day rise in two years on Monday after a tumultuous weekend for the country’s economic management brought the firing of the central bank governor and the resignation of the president’s son-in-law as finance minister. The currency, which is still down a quarter against the dollar this year, strengthened more than 4% against the dollar to TL8.1615 by late afternoon in London, even as the country’s most senior economic post remained vacant. Economics and analysts have warned of soaring inflation and deep economic harm stemming from the collapse in the lira, which the central bank has been broadly reluctant to tackle with higher interest rates. Instead, the country has burnt through tens of billions of dollars of its reserves over the past year in a failed attempt to prop up the currency. Read more.
Global News
Nov 09. BoE Governor Bailey Speech and Haldane Speech. Governor Bailey’s speech was delivered at a ‘green finance’ summit. It seems that increasingly there will be a micro and macro focus on sustainability and clean energy. The Haldane speech was about the long term economic implications of the coronavirus on the UK. Haldane said the BoE will keep borrowing costs at rock bottom levels for as long as necessary to get the economy moving.
Nov 11. New Zealand Reserve Bank Monetary Policy Committee and Rate Statement. Whilst no rate cut is expected just yet, there are nearly two 25bp rate cuts priced in by mid next year.
Nov 12. US CPI ex. Food & Energy. Measure of price movements by the comparison between the retail prices of a representative shopping basket of goods and services. Generally speaking, a high reading is seen as positive (or bullish) for the USD, while a low reading is seen as negative (or Bearish). Last week, NFP data was positive so interesting to see if this follows suit. Certainly a positive result will reinforce the rally in stock markets.
Crypto News
Nov 12. Stratis: STRAX Mainnet Release. Because of challenges presented by the old Stratis blockchain, the team opted to perform a token swap to a completely new blockchain that can provide new innovative features and bring crucial changes to the tokenomics of the Stratis platform.“By completing a Token Swap and creating a new blockchain, multiple improvements and feature additions can be achieved without fear of maintaining a heterogeneous network and introducing multiple forks and votes. Furthermore, the minting of additional tokens will enable the continued development of the Stratis Platform and assist further growth of the platform through third-party engagements and relationships.” Po.et: POE Binance Delisting. Binance regularly delists coins that no longer meet a certain set of criteria. A specific reason is generally not made public.
Nov 15. Bitcoin Cash: Bitcoin ABC Fork. Disagreements about implementing a difficulty adjustment algorithm (DAA) and a controversial infrastructure funding proposal are responsible for splitting the Bitcoin Cash community. A small part of the community in favor of the implementation will hard fork and create a new currency with the name Bitcoin ABC.
Nov 16. Stellar (XLM): Meridian Conference. “Meridian 2020 will bring engaging speakers and content from within and beyond the Stellar community, exploring topics such as interoperability, liquidity, policy, and more. This blockchain conference is virtual and free for everyone.”
Optimizing Your Productivity With The 80/20 Principle
There are few principles that are so ubiquitous in our lives than the Pareto principle, named after its founder Vilfredo Pareto who was an Italian economist in the 19th century. Pareto initially noticed that approximately 80% of the land was owned by 20% of the population and later discovered that a lot of economic activity was subject to the same principle. The Pareto principle, also called the 80/20 rule, was later found to be useful in many other areas and is now generally summarized as follows: 80% of the results comes from 20% of the efforts.
Knowing that we can take Pareto’s principle and apply it to almost any situation, how can we use it to optimize our productivity? How can the Pareto principle help us prioritize our days, weeks and months? The Pareto principles suggest that 80% of our results come from 20% of our efforts so it’s a good exercise to find out which tasks are the most important to you and which ones should be avoided. Our time is limited so we should always aim to work on the most important, the highest leverage task as possible.
Take a step back and think about the things you’ve been spending time on lately. Are there things that you’ve spent a lot of time on yet yielded very little result in terms of money, happiness or productivity? Start by cutting out things that make you waste time regularly. In contrast, also look for things that have had a major positive impact on your life lately? Aim to focus on these activities more. Given that this is a newsletter read by primarily traders, don’t hesitate to ask that question about trading results as well. Which 20% of your trades resulted in 80% of your profits? You’d be surprised at how such a simple question can make you realize the things you’re best at. Focus on a strategy that works for you, you don’t have to be the best at everything.
Disclaimer: The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. I am not a financial advisor. Every investment and trading move involves risk. Do your own research when making a decision.
