Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for October 10, 2019. The text below is an excerpt and does not contain the full analysis.
Hi Everyone,
Perhaps one of the oddest harbingers in our current global economy is the staggering amount of negative-yielding debt. As it stands, approximately $17 trillion worth of value is parked in bonds that pay the bearer negative money to hold.
The largest issuer by far is Japan, but the levels in Western Europe and the United States are also quite staggering.
Yesterday, this bizarre party has been joined by the most unlikely of friends… Greece.
That’s right, the country whose outstanding debt problem nearly sent the entire European Union into economic oblivion in 2012 is now being paid to borrow more.
Words cannot describe how insane this is. The spectrum of risk vs reward is completely broken. Watching economists on the television this morning try to pass this off as ‘normal’ and ‘sustainable’ is literally making me sick to my stomach.
Today’s Highlights
- Fed is Fighting for Survival
- Turkish Incursion
- Bitwise Rejected
Please note: All data, figures & graphs are valid as of October 10th. All trading carries risk. Only risk capital you can afford to lose.
Traditional Markets
As if the above Greek saga isn’t enough, further discord has recently been struck behind closed doors.
Last night, the US Federal Reserve banks (AKA: the largest player in the financial markets) released the meeting minutes of their interest rate decision on September 18th with the revelation that…
As we know, on that day the Fed cut the interest rate from 2.25% to 2%. It seems that some officials were arguing in favor of a deeper cut to 1.75%, while another group didn’t want any cut at all.
Ladies and gentlemen, what we have here is a very rare 3-way split. At this point, we can probably just kiss forward guidance goodbye and start guessing what the path might be from here on out.
One thing that the Fed doesn’t seem to be disagreeing on is cash injections. Yes, that’s right, repo operations are set to continue and the Fed will lend money in the short term markets, no less than $75 billion per night, until November 4th.
Still, even though they are clearly injecting fresh cash into a dry market, Chairman Powell insists that this is not QE.
Turkish Action
Now that the dream of an Islamic State in Syria has successfully been quashed, it seems that the end might be nearly in sight for the brutal 9-year war, but it’s not over just yet.
In a move that they’d been apparently mulling for a while, Turkey has invaded a heavily populated Kurdish region in order to try and carve out a safe-zone along its southern border.
The move has been widely condemned by the international community. President Putin, President Trump, and President Junker all seem to be on the same page in condemning Erdogan. As well, cautionary warnings have been sent from France, Germany, Great Britain, the Netherlands, and even the Red Cross.
As far as the markets are concerned, the most prominent was Trump’s warning that if Turkey goes too far he’ll destroy their economy. So, once again we must thank Donald J Trump for an excellent trading narrative.
All eyes are now on the Turkish Lira, which is most likely to depreciate further the more radical the fighting gets.
Here we can see the Lira’s massive depreciation against the USD since the war began.
Bitwise Rejected
The last remaining hope for a bitcoin ETF by the end of the year has now been squashed. Not that many out there were expecting the Bitwise proposal to carry, but if there were any holdouts they can now take a breather.
The market knew exactly how to react to this announcement as the price did not move, not even slightly, as the news broke.
Before the news however, there was some positive action, though your guess is probably as good as mine as to what caused it. Here we can see a nice push (purple) off the psychological level of $8,000 (yellow).
The move does seem to have come with a noticeable uptick in volumes at popular bitcoin trading venues. Data compiled by Messari Crypto is showing that the top 10 exchanges traded about twice yesterday what they did the previous day and the CME futures have also doubled Tuesday’s performance.
What’s most exciting is that the new Bakkt futures contracts broke a new record volume of 224 BTC.
Now there’s something that makes sense. Unlike the volume traded on Bitcoin’s blockchain which is noticeably down today, Wall Street’s attraction to bitcoin seems to be directly linked to its volatility. Though it’s difficult to say definitively whether the volatility causes volumes or vice versa, my feeling is that it’s the former.
Mati Greenspan can be found on LinkedIn, Twitter, or etoro.Â
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