Fireworks for celebrations? Bitcoin and the S&P 500 trending up. Things look as though they may be heating up in this fourth quarter of 2019. We had some exciting developments over the past few days that suggest we can expect a general increase in volatility into the end of the year.
Since Friday we have seen Bitcoin surging by some 40%, then on Monday, the S&P 500 finally broke through that stubborn 3000 levels, gapping-up on open to trade at new all-time highs.
Tomorrow the FOMC meets again to set the target Federal funds rate. The market has priced in a further 25 basis point cut, with the CMEs FedWatch indicator showing a 95% chance of a rate cut.
- But how will markets react when they receive what they expect?
- Mainly since this is the third such rate cut in a row?
- Is it a tacit confirmation of what the weak manufacturing indicators are suggesting?
- That the US is sliding into recession?
- Or will a booming stock market once again allay investor’s fears and confirm that it’s all still business as usual?
Is it the Bitcoin, a tale of two halves?
Bitcoin’s story this year has been divided into two parts. The first half of the year saw the cryptocurrency searching for a bottom after 2018’s painful bear market that saw it lose more than 80% of its value. Between January and July, it rallied from a yearly low of around $3600 per coin to a high just below $14,000.
- Was this the disbelief rally of infamous Wall Street Cheat Sheet fame?
- Or is this rally doomed to fail like all the others, signalling a more prolonged bear market?
The above has been precisely the question that the crypto market’s most massive name has been trying to answer all of this year.
Bitcoin’s price topped-out just under that critical $14,000 level in July and has been trending back down ever since, once again searching for a bottom to confirm that the bear market is finally over and that a new bull phase is upon us.
The price hit a low of just above $7300 on October 23. On Friday, October 25, it surged by around 40%, going from about $7391 to $10,358 in approximately 16 hours. This move was significant for several reasons.
- Firstly, it marks the cryptocurrency’s first higher-high since June of this year.
- Second, it broke the hugely psychological $10,000 mark.
- Third, it was also the 3rd most significant daily move in the entire history of the asset.
Hot on the heels of the price rally, an avalanche of articles claiming to explain the move hit the digital presses. The most popular reason provided was Chinese President Xi Jinping’s positive comments regarding blockchain.
We got to keep in mind China formerly used to represent the most significant cryptocurrency market. Before it banned cryptocurrency exchanges back in 2017, note that Xi’s comments were about blockchain, not bitcoin. Why did bitcoin rally?
Despite this, the markets seem to have read the terms as being interchangeable. Another prominent explanation for the price move gets attributed to Bakkt, the NYSE-backed bitcoin futures exchange that crypto traders have been eagerly anticipating since 2018.
Last week it was reported that Bakkt had almost doubled its previous volume record with nearly half the trading day remaining.
“Bitcoin is for the people. You can make a lot of money out of it. You can even start a business doing that,” said one cryptocurrency enthusiast in Bitcoin Valley, a rural area of Silicon Valley on the west coast of the United States.
“Most banks are too slow to catch on. You need two things – technology and customers.”
The geeks who watch this new breed of cryptocurrency are eagerly awaiting its more full release, hoping to cash in on any gains.
At the hottest exchange moment of the crypto.