Connect with us

Market Watch

How the crypto market is reacting to the imminent US elections

Published

on

With less than 30 days left until the race for the White House, markets appear to be dealing with an increasing level of political uncertainties. The impending election is coming as a conclusion to a chaotic year featuring business shutdowns and monetary inconveniences, amid fighting against the infamous global pandemic surprise, COVID-19. Several tweets from the incumbent president relating to the election, have been seen to impact greatly on the stock markets as well as Bitcoin and other crypto assets. 

Political uncertainty at every point has been a function burdening the market and keeping traders anxious as they strived to analyze the possible outcome. On his part, President Donald Trump has increasingly claimed in many of his tweets that his opponent, Joe Biden would crash markets and tax the country into depression should he win. 

Through the course of the month, various events, announcements, and actions have impacted significantly on the price action of the crypto markets. First, Trump’s diagnosis of the coronavirus and afterward, his announcement to end stimulus negotiations. 

The President’s COVID-19 diagnosis further heightened the uncertainty already associated with the election. Following immediately after the announcement, U.S stocks fell along with Bitcoin and Other cryptocurrencies. 

Crypto markets reaction alongside Trump’s COVID-19 recovery

On the second day of October, President Trump confirmed via Twitter that he had contracted COVID-19, along with the First Lady, Melania. He announced that they would both immediately begin with quarantine and in a more optimistic tone, noted that they would definitely get through the illness.

Both stock and crypto markets showed  an immediate reaction towards this announcement. The S&P 500 and the Dow Industrial Average both experienced a notable loss as the markets opened low following the announcement. Bitcoin, which seems to be moving in tandem with the stock markets, led the losses with a record of 4% loss in 24 hours after the announcement. As usual, other altcoin markets followed Bitcoin’s lead and acted accordingly. The overall market capitalization for the crypto markets dropped by 3.6%.  ETH experienced a 4.8% plummet in price, while Chainlink recorded a 7.5% loss also in a span of 24 hours. Gold, on the other hand, traded higher upon the announcement of Trump’s diagnosis. 

After the immediate slight drop, price movements remained quite steady. However, the market started showing an inverse reaction from the initial losses and began to react positively following Trump’s announcement of a likely discharge. The declaration led to a major spike in the price of Bitcoin.

Trump shocks financial markets by ordering a halt to stimulus negotiations 

For months now, negotiations for a second COVID-19 stimulus package for United States citizens have been ongoing. However, President Donald Trump surprised the markets by unexpectedly announcing via his Twitter page his plans of postponing the stimulus talks until after the 2020 presidential election.

“Nancy Pelosi is asking for $2.4 Trillion Dollars to bailout poorly run, high crime, Democrat States, money that is in no way related to COVID-19. We made a very generous offer of $1.6 Trillion Dollars and, as usual, she is not negotiating in good faith. I am rejecting their request and looking to the future of our Country. I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business.”

Trump ordered a halt to negotiations till after the election on November 3rd. He added that Pelosi was “not negotiating in good faith”. 

The market seemed to have met this announcement with clear disapproval as the price of BTC dropped in sync with the visible fall experienced in stock markets shortly after the declaration, Ethereum, and other major altcoins also suffered a plummet in price. The price drop in bitcoin along with other mainstream markets, is a clear indication to support the view that bitcoin continues to correlate with traditional markets as its price action appears to react in tandem with them. 

It is commonly acknowledged that the performance of the stock market is majorly reliant on Trump’s position. This implies that if Trump should lose the election, the stock market will fall into a chasm. The American stock market likes Donald Trump because he cuts taxes for the stock market. So if he wins, the US Dollar will rise along with the stock markets. 

However,  the stock markets continue to rise even though it is believed that Biden might win. The possibility of Biden winning the election gives more prospects towards the collapse of the US Dollars. The shrinking in its interest rates would make it less enticing, compelling investors to contemplate deposits in other currencies. With this, the US Dollar is at a threat of losing its perceived safe-haven reputation and might not be able to secure its status as world reserve currency. 

Bitcoin is currently a standout amongst other performing assets of the year, notwithstanding, with the coming of the US elections which is expected to bring about the weakness of the dollar, we can anticipate a further fuelling of the top coin for the remainder of 2020. 

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading
Click to comment

Leave a comment:

Learning Guides

Understanding Speculation and Crypto Volatility

Published

on

Everyone who dabbles in the crypto industry learns almost immediately that the market is very volatile and oftentimes things can change very quickly. That volatility is the fundamental reason why some investors make absolutely stunning gains in so short a time and others lose a lot of money as well. Trading in crypto is one of the riskiest ventures any person can undertake and as they say, it’s not for the faint of heart. The risks can be mitigated of course and sometimes depends specifically on the coin or crypto asset being traded on, barring general market trends.

Nevertheless, to get to the bottom of the volatility concept, one must understand speculation in the market. To start off, the concept of speculation isn’t limited to cryptocurrencies, on the contrary, speculation has existed for as long as economics and trading has. But it is worth saying that speculation is often a feature of novel sectors, assets, commodities and the like. So, even though cryptocurrencies have been around for more than a decade, they’re still in their infancy as far as markets go. One could say that the market is still trying to find its feet.

One of the fundamental reasons why cryptocurrencies are so volatile is that they are fundamentally backed by nothing of value outside the attention that they get. Unlike many fiat currencies which are either pegged to another currency’s value or whose value is unilaterally determined by a central authority, cryptocurrencies only derive value as a function of how many people are willing to use is to transact, i.e. trust in the asset because other people trust it. As a rule of thumb, the larger the number of people who accept the asset, the more valuable it becomes.

This is one of the hallmarks of speculative trading. In the crypto world or in any market that’s novel and untested, many people are in it to win it which means their strategies in trade has the objective of making as much profits as possible in the short term. Therefore, the market enters a subtly dangerous cycle of rapidly changing prices of assets. Basically, investors typically buy assets when prices are low and wait. As more investors are attracted to the commodity for its low prices, it sets off a cascade where more people buy in, causing the price to steadily rise. 

However, all good things must come to an end and it almost always gets to a breaking point whereupon the price gets high enough for investors to begin to sell. This reverses the earlier cascade and as more and more investors pull out, the prices can fall dramatically causing even more to sell off in fear of losing whatever investments they have left. The prices having fallen resets the game and primes investors to begin buying again.

Volatility has been one of the talking points of many critics of cryptocurrencies often comparing it to a Ponzi scheme. And in certain cases, persons of interest with large pulls and audiences can substantially affect the rate at which prices rise and fall. Other factors include government regulations. Volatility at its core reflects the often chaotic nature of trade and market interactions and human hopes and fears.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Market Watch

What China’s crypto clampdown means for investors

Published

on

Over the weekend, China, the biggest crypto mining country once again, began to clamp down on cryptocurrency. Ten Chinese agencies including the central bank and banking, securities and foreign exchange regulators have vowed to work hand in hand to expose illegal cryptocurrency activity.

China has always placed stricter rules on cryptocurrencies but the new rule has made all crypto-related activities illegal. According to the People’s Bank of China (PBOC), it is illegal to cryptocurrency trading and anyone that does so will be severely punished; this includes those within China that are working for overseas platforms. To fully phase out the cryptocurrency mining sector, the National Development and Reform Council (NDRC) said that it would launch a nationwide crackdown on cryptocurrency.

Over the years, China does not recognize cryptocurrency as a legal tender. In 2013, the Chinese government referred to Bitcoin as a virtual commodity that individuals are allowed to freely participate in. This freedom, however, precludes banks and payment companies from providing services that are Bitcoin related.

In 2017, Initial Coin Offering (ICO) was banned. The ban was also extended to the conversion of legal tenders to cryptocurrencies by trading platforms which led most of the platforms to shut down operations in China. The crackdown led 88 trading platforms and 85 ICO platforms to withdraw from the market as of July 2018.

To China, the crackdown on cryptocurrency is necessary as the country is trying to launch its official digital currency and the need to fulfil its 2060 climate targets. The crackdown was necessary as cryptocurrency was seen as infringing on people’s properties and ‘disrupting the normal economic order.’

The statement by PBOC on Friday was unequivocal as the current crackdown is distinct from the previous ones. In his statement on Friday, PBOC called Bitcoin, Ether and Tether ‘legally irreparable’ and should not be used. The new regulations forbid financial institutions, marketing and IT providers from supporting crypto-related activities. The activities of both crypto holders and miners are now considered illegal. This is what Henri Arslanian, a PwC crypto leader termed as “No ambiguity. No room for discussion. No grey areas” in his tweet.  

What does this mean for crypto holders worldwide?

The major effect of China’s crackdown on cryptocurrency is the increase in price volatility. While volatility is a common phenomenon in the crypto world, a crackdown initiated by the world biggest cryptocurrency mining country will have a huge effect on market price.    

After the PBOC interview, Bitcoin fell by 4% within 24 hours and is currently trading at $43,320. Ethereum fell by 6% and it is currently trading at $3,036. With the Evergrande debt crisis and the huge blow bedevilling the crypto market, a clampdown by China would most likely keep the market price on the red until another good news crops up.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

Crypto Assets

Crypto prices drop as global market fear increases

Published

on

Top cryptocurrency prices have fallen amidst a drop in stocks and fears over China’s Evergrande debt crisis. In the last 24hour, Bitcoin dropped from $47,772 to $42,630 shedding about 8.58%. this is the lowest in price since another bull run began on Sept 5 after the April crash.

El- Salvador’s President, Nayib Bukele sees the fall as an opportunity to invest more. Recall that the country adopted Bitcoin as a legal tender on September 7. Despite the adoption, the price of Bitcoin has fallen by almost 14% since then.

Other coins have experienced dramatic crashes within the last 24hours. Solana, a coin that has experienced 355% growth within the last 3 months fell from $162 to $130 shedding about 11.39% within the last 24hours. Solana’s fall may be categorized by the 17-hour outage which the founder, Anatoly Yakovenko said was caused by bots “flooding the networks”

Ethereum fell by 9.37% while Dogecoin and Axie Infinity fell by 11.22% and 14.14% respectively within the last 24hrs hours. While crypto experiences dark Monday, El-Salvador keeps investing more money in Bitcoin.

A look at the global market

The global market is experiencing fear due to the Evergrande debt crisis. A report published by the University of Michigan shows that consumer’s sentiment is beginning to decline. This trend alone may impact the crypto market as well.

On the other hand, the global market downturn must have been spurred by the Evergrande debt crisis. The company grew to be one of China’s biggest companies by borrowing more than $300bn. Last year, Beijing made rules to control the debt owed by big real estate developers. This led Evergrande to offer its properties at major discounts to raise more money to keep the business afloat. Right now, the company is struggling to meet the interest on payment of debts.

Why would it matter if Evergrande fails?

The collapse of the multi-million dollars company would affect the global market; including the crypto market. Many people bought properties from Evergrande and they expect to make gains. If Evergrande falls, crypto investors will be forced to withdraw more money to keep their business running without the means to invest more. When one business fails, the other gets affected indirectly. This also applies to other firms that do businesses with Evergrande.

The potential impact on China’s financial system is another effect of Evergrande’s fall. In his statement to BBC, Mattie Berkink, the Economist Intelligence Unit (EIU), said that “the financial fallout would be far-reaching. Evergrande reportedly owes money to around 171 domestic banks 121 other financial firms” if the company fails, other lenders or businesses may be forced to lend less. Thereby leading to a credit crunch- a situation where companies struggle to borrow money.

Comments

Decentralize Daily

From Crypto and Blockchain to AI, Fintech and Web 3.0 delivered twice in a week (Mondays and Fridays)

Continue Reading

TRENDING

%d bloggers like this: