28 May 2020

Bitcoin Surges Past $9,100 Amid High Volume Trading

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News shaping
the markets today

     

What’s happened: Bitcoin returned to its halving levels on Wednesday, with its price surging above $9,100 in high-volume trading.

What’s happening: After struggling to stay above the $9,000 mark on Tuesday, bitcoin gained momentum yesterday. The leading crypto surged past $9,000 on Wednesday to hit $9,100. The coin was trading at a high of $9,235.53 at 7:30am GMT today.

Investor sentiment remains bullish, as is indicated by bitcoin trading above its 10-day and 50-day moving averages. Bullish traders are optimistic about the crypto market and are hopeful of bitcoin breaking the psychological barrier of $10,000, a price at which the coin has not traded after reaching it for a short while on May 7.

Some experienced traders believe the covid-19 pandemic is the biggest opportunity for the crypto asset class.

Details: In the first quarter, the total trading volume in the cryptocurrency spot and futures markets reached a whopping $8.8 trillion, with a 314% quarterly increase in futures trading and a 104% spike in spot trading. Experts also indicated a steep rise in the share of mainstream cryptocurrencies, like bitcoin, ether and litecoin, with traders staying away from the less popular ones.

Why are investors bullish about cryptos amid covid-19: The pandemic has had a major impact on the global economy. Despite this, the financial markets have held up, including the riskier asset classes like equities. Although investors did scurry into safe-haven assets when the pandemic scenario began to unfold, bulls returned fairly quickly. In fact, traditional safe-havens, like gold, have declined during this period of uncertainty.

With risk appetite seemingly intact and geopolitical tensions grabbing headlines, bitcoin and other cryptocurrencies have found favour as a hedging tool in diversified portfolios. US and China have been at loggerheads for several weeks now. US President Donald Trump publicly attacked Beijing for failing to curb the spread of coronavirus during the early stages of the outbreak. Earlier this month, there were reports of the US increasing military pressure on China on accusations of the Asian nation seeking to leverage the pandemic to extend its presence in the South China Sea. In his latest move, President Trump reacted to a new China national security law for Hong Kong, threatening to increase tariffs.

The worsening relations between the world's two biggest economies may have supported the crypto market, which is widely considered a hedge against geopolitical uncertainty.

The pandemic has also forced governments across the world to announce massive stimulus packages. The increase in money supply is expected to trigger inflation. Unlike fiat currencies, only a fixed number of bitcoins are available for trading, which not only preserves their value, but also becomes a hedge against inflation in the economy.

The Markets Today

     

Crude oil will be in focus today, as investors await the EIA’s (Energy Information Administration) report on crude inventories.

Context: Crude oil futures traded lower on Wednesday, following reports of Russia wanting to ease the massive production cuts starting July. Rising tensions between the US and China also impacted commodity prices.

Details: Bloomberg reported that Moscow wishes to keep up with the agreed terms of easing production cuts from July, as decided at the OPEC+ (Organization of the Petroleum Exporting Countries and its allies) meeting earlier this year.

Traders were also keeping a close eye on the rising tensions between Washington and Beijing, with China imposing new security laws on Hong Kong.

WTI (West Texas Intermediate) crude for July delivery dropped 4.5% to end at $32.81 per barrel on Wednesday. July Brent crude, which is due to expire at the end of session on Friday, also declined around 4% at $34.74 per barrel.

June gasoline dropped 5.3% to 99.33 cents a gallon on Wednesday, while June heating oil lost 1.9% to 97.21 cents a gallon. June natural gas dropped 4% to $1.722 per million British thermal units.

What to watch: Traders await the US oil supply report from the EIA. The weekly supply report is releasing a day later than scheduled this week, due to the Memorial Day Holiday on Monday. Analysts expect crude inventories to decline 1.2 million barrels for the week ending May 22. The EIA is also projected to report a decline of 1 million barrels in gasoline stockpiles, while distillate supplies are expected to increase by 2.5 million.

The EIA is also scheduled to release its weekly report on supplies of natural gas on Thursday, and expectations are pinned at a rise of 101 billion cubic feet.

Other Markets: European indices were trading higher at 9am GMT, with the FTSE 100, German 30 and French 40 up by 0.6%, 0.4% and 0.5%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Spain’s business confidence indicator, Germany’s inflation rate, Brazil’s unemployment rate and loan growth, Canada's current account and average weekly earnings as well as the US durable goods orders, GDP growth rate, initial jobless claims and pending home sales.

 

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