Welcome to another edition of Qume Market Mondays!
Bitcoin
Bitcoin price fell below $9,000 on Thursday and is now trading at $8,900 levels mimicking the bearish trend of markets worldwide. With market volatility spiking and countries expecting a deflationary economic environment soon, we expect that bitcoin will have a hard time recapturing $10,000 price level. This goes against investor expectations of bitcoin acting as a hedge against inflation caused by overshooting of fed stimulus packages in the crisis.
DeFi Markets
The Compound protocol now has around $624 mn locked-in, making it the world’s top decentralized finance platform.
After Compound began distributing its $COMP token on June 15th to both lenders and borrowers, the price of the token skyrocketed to a point where it became possible to earn $COMP for effectively no cost. The hype for ‘Yield farming’, however, is not much more likely to last than 2017’s initial coin offering boom as the Compound Token suffered heavy losses on 24 June. After trading as high as $427 on Tuesday, COMP fell below $250.
But as long as there is a large gap between the price of COMP and what it costs to earn it, yield farming will likely continue.
USA & EA
The equity and crypto markets had a bad week, both closing on weekly losses as daily COVID infection rates in the US and some East Asian countries continue to rise. Even the big tech stocks like Microsoft, Amazon and Facebook, along with commodities markets took a nosedive and the trend is likely to continue.
Here’s how various asset classes have performed this year so far:
India
India is slipping into recession while it struggles to contain the coronavirus and its effects.
Axis bank LTD, the third-largest bank in the country just had its investment rating lowered to BBB- from BB+ by S&P ratings. This comes in lieu of heightened economic risks to the Indian banking system due to the pandemic, which affects the lender’s asset quality and financial performance.
Looking at the chart of the industrial production index of India, we can see it is at its lowest since 2012, and if nothing changes, the Indian banking market will see more banks downgraded in the coming days.
The chart shows the Industrial production index of India since 2012 calculated across six use-based categories:
1. Primary goods
2. Capital goods
3. Intermediate goods
4. Infrastructure/ construction goods
5. Consumer durables
6. Consumer non-durables
The index is a good proxy to see the direction in which the GDP of India is headed.
Germany
Wirecard, the backbone of Germany’s fintech industry had its operations frozen by UK regulators. Reports say that $2bn are missing from company accounts. The company filed for insolvency on June 25th, a week after the missing funds were reported.
Ernst & Young was responsible for the auditing of the firm but many investors of Wirecard had complaints regarding Ernst and Young’s accounting practices for years, however, they were left unattended by the firm. The entire situation is believed to be the worst financial hit to the European economy after the 2008 financial crisis but Wirecard’s rivals like Adyen NV and PayPal are sure to benefit from this.
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