Qume Market Mondays- 13 July 2020

Photo by Sharon McCutcheon on Unsplash

Welcome to another edition of Qume Market Mondays!

· Despite low trading volumes, Bitcoin rallied along with other indices last Monday, showing recovery to $9490. After that, it fell back to find support at $9200+ price levels.

· Correlation of Bitcoin with the S&P 500 has been rising consistently since last Friday and is now around 71%. In terms of volatility, Bitcoin is at a 2-year low.

Looking at correlation indices and recovering markets worldwide, we expect bitcoin to make a recovery too again this week but the magnitude of that recovery is hard to foresee.

Markets should generate much clearer signals once it picks up momentum and trading activity is back at normal levels.

The crypto trading industry could soon get the mainstream endorsement we all have been waiting for, with rumours that Coinbase is planning to go public later this year. The exchange is looking to go public through a direct listing. In its last funding round in 2018, Coinbase was valued at $8 billion.

Another mainstream endorsement can be seen in India with Tata Consultancy Services (TCS), a subsidiary of Tata, one of India’s industrial giants has announced the launch of its Quartz Smart Solution to help financial institutions offer cryptocurrency trading. It supports multiple cryptocurrencies and stable coins. This will allow banks and investment firms to invest in cryptocurrencies.

· This week has been good to markets, US and China stocks advanced and NASDAQ composite closed up 2.2% on July 6 to reach an all-time high.

· Other US indices like the S&P 500 and Dow Jones were also up 1.6% and 1.8% respectively. For the S&P 500 it was the longest streak of gains since December for five days.

A market rally now would imply that investors are looking beyond the rise in Covid-19 cases and are betting on economies reopening.

Nearly $40 billion has flowed into gold-backed exchange-traded funds in the first half of this year, which is the highest in past nine years. Gold is attractive to investors in this ultra-low interest rates environment and now Gold seems to be the better alternative than yields from short-term government treasuries.

· China will release its gross domestic product figures for the second quarter this Thursday, which is likely to give the world some insight into post-lockdown recovery. Based on the statistics we have for China until May suggest that although it will be below the pre-pandemic levels, signs of improvement are bound to be there.

Several macro factors are behind this thought:

1. Growth rate of value-added to the industrial sector increased in the first two months of the 2nd quarter.

2. Total value of Imports are down but exports are up for the first two months of the second quarter.

3. Domestic trade has improved as well with total retail sales of consumer goods up 20.8%.

· Employment claims statistics in the US are indicating a healing labour market.

· Last month it was at its lowest since the coronavirus breakout but with retail sales up in the country, we are looking at quite a solid advance.

The world economies are still suffering from low consumer demand and the devastation of supply chains and whatever recovery we have seen up until this point is still exposed to sudden downturns in future because of the continuously rising health crisis.

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