It had been a big week for markets all round, with the Australian SPI 200 now down almost 40% high to low and the S&P 500 around 35%.
There is a sense that the panic selling and liquidations ought to be just about finished and that the general dragging of everything into the abyss ought to see many assets perceived to be valued cheaply for what lies ahead. We think that the clear value in some sectors for what should mostly be a 2020 problem means that we should see some stability – and buying of assets this week as investors adjust to the new real.
That new real looks a lot like a supercharged version of the old real, which includes the nuclear option – long expected – of monetary and fiscal stimulus leaving the markets on a rope that depends on the decisions of US institutions.
As portfolios rebalance, commodities are likely to benefit, including but not limited to gold, as countries engage in fiscal stimulus as well as devalue fiat currency. Australian commodity producers such as BHP, Newcrest and Santos could have a strong bounce given the added benefit of the weak Australian Peso as well.
Bitcoin should also benefit from the new real as a form of monetary value as it comes into its own as an asset uncontrolled by government intervention and as a superior form of monetary value to Gold.
Bitcoin USD on the 1hr chart shows a strong bounce from its lows, coming up against the long-term downtrend for the third time at the present time. It didn’t quite get back to its 200 MA before the most recent bounce, making it look quite strong.
Bitcoin has had one of the most phenomenal experiences of all assets, with huge volumes since its price collapse
This chart on the daily volume over 30 days, showing a new normal.
And on the weekly volume, huge back to back volume over 2 weeks.
With a general state of ‘extreme fear’ in the markets the asset has had a lot of interest, and a strong bounce from the low.
All in all, these are theoretically perfect conditions for Bitcoin and a huge opportunity for digital assets to show what they are capable of doing. Although there will be a rapid jerk into whatever alignment looks like over the next fortnight, a longer-game has validated the space; an exciting couple of years is coming up in the next few years as digital assets mature.