A Sick Financial System and a Vaccine - Mine Digital
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A Sick Financial System and a Vaccine

November 10, 2020 • 
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Our weekly wrap of capital markets and the bitcoin price covers trends in financial markets in the context of the most recent week.

Data

It’s difficult to take a measure for the last week given the moves overnight, but we will treat that move as the start of a new sentiment.

Capital Markets

Overnight we saw moves that could be a fundamental pivot in markets.

Whether Trump is successful in his challenge to Biden or not, at the moment we have the perceived stability of the technocracy back in charge in a Biden presidency as well as a cure-all for the risk of the coronavirus.

This saw some of the most dramatic movement we have seen in markets to make a new all-time high in the S&P500. Oil traded around 8% higher at the peak of its move.

If the U.S. Fed are not able to reduce their monetary interventions in markets, and fiscal stimulus is also expected to kick-start the Biden presidency, then it starts to encourage a view that maybe David Portnoy was not so crazy when he said that ‘Stocks only go up’.

Although the move overnight helps to explain the one-way action since the start of November, where the vaccine results were already known to some of the market, its ability to break the high in that way is very bullish. Expect a pull-back as those who got the early mail on the vaccine cover their trades but it is still a strong sign.

Bitcoin

Bitcoin has had a terrific week, completing a bullish technical pattern and now consolidating at the top of that pattern.

Some commentators are suggesting that it should go higher in the near-term, and it certainly could. From a technical perspective, Bitcoin sits in no-mans land and its all-time high is within reach.

We have seen the selling of momentum in bitcoin in the last couple of months, and there could be a re-establishment of this strategy to hold the asset here for as long as possible. This strategy sold volatility, crushing it, while buying spot-market bitcoin and stopping out leveraged, bored and momentum traders.

These are probably the two real options in Bitcoin.

BTC/USD Chart: Daily

Digital Assets

DeCentralised finance assets formed a good low this week after the bitcoin move had initially exacerbated their weakness. Aave and YFI were the main assets to recover particularly well.

We expect that Bitcoin remains a gateway drug to de-centralised finance and that institutional bids in other digital assets are inevitable.

Volume

Sentiment

The sentiment index has been ratcheted up to an ‘Extreme Greed’ reading of 90 in the last week.

It is difficult to conclude with whether this encourages the FOMO that could see the market break all-time-highs or whether institutional players will not chase the market, and will be able to reinstitute the selling of volatility and buying of more of the asset.

BTC Dominance

BTC dominance has staged a strong reversal, tracking back over half of the move from its significant level at 71.

Money

We had seen the start of what looked like the selling of U.S. dollars for Bitcoin and gold the last week. It had originally looked like low liquidity markets doing what they do until yesterday when the USD was sliding without relief.

DXY

Although the USD has bounced overnight, it is not very convincing and we should still take the move as legitimate.

Gold

Gold as opposed to the DXY has made a far more significant move lower, after also sliding higher and looking very bullish. It is probably a long here in the short=term having broken the major level, but was squeezed easily.

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