Dollar Keeps On Weakening

The value of the greenback keeps on sliding. Apparently the perceived slow-down in Fed interest rate hikes, has had its effect. Although many analysts are pointing to the fact that the Fed will likely hike rates even twice more before the year ends, the market seems to be oblivious to what the near future is likely to bring. The Fed has indeed delivered some mixed messages before, but now the policy seems to be quite clear: if the economic indicators in the US are ripe – unemployment figures are down, wages are increasing and inflation starts accelerating – the Fed will hike the rate. read more…

Bitcoin Valuation Surpasses $7 Billion, Still Short of Historic High

Bitcoin’s market cap has surpassed $7 billion for the first time since September 2014. Many factors have contributed to bitcoin’s resurgence, but the hype over the $7 billion USD valuation fails to capture the whole picture. Bitcoin was worth about twice as much at the end of 2013, but it has been slow to recover since. There are some other factors that are not as obvious that must be taken into account in order to analyze the merits of that $7 billion USD mark.

Critical Factors

There are mainly 2 ways in which bitcoin valuation can go up. Either demand for bitcoin is high relative to supply, therefore increasing the value of each coin, or more coins have come into circulation. A combination of both factors can bring even steeper market cap gains. Given that more bitcoin is constantly coming into the market – even if rewards are halved periodically – the price of bitcoin should be a stronger factor in determining market cap.

The Current Situation

With the next mining rewards halving in July, price should be going up, since overall supply of coins is set at 21 million and less of them should be coming online every time a halving happens. This means that bitcoin’s market cap is expected to rise further, due mainly to the system’s scarcity protocols. This means that even though there will be more coins are expected to come online until the year 2140, the rate at which they will come online is currently undershooting demand. This is supposed to keep prices rising overall in the short term.

Risks Abound

Nevertheless, there are some medium to long term risks to bitcoin, that threaten to keep its market cap potential low relative to its almost $14 billion USD peak. More cryptocurrencies are coming online, with improved features. Apart from that, bitcoin is facing transaction challenges and other technical issues regarding block size that may affect its market cap in the future.

Bitcoin in Decline?

As much as the current increase in valuation is catching a lot of headlines, it is necessary to take the following into account:

• Valuation was much higher – almost twice as much – with less coins in circulation.
• The current bitcoin price of around $465 USD – at the time of publication – is less than half of what it got to at its peak, which was close to $1,200 USD.
• Bitcoin mining rewards are about to halve, but the cryptocurrency is not even close to its historic highs.

All this points to a decline. However, bitcoin has always been a high risk asset, with the capability of rising meteorically just to crash, slashing the value of the money bitcoin users hold. Arguably, if bitcoin finds some kind of stability that would indicate that there is enough maturity in the market to attract more investment. In the meantime analysts and investors that are looking at the bitcoin economy, should not only look at the increase in bitcoin price, but should also keep an eye on the context, including market cap and historic data.

Greenback Slump Continues

It seems that the downturn in the price of most raw materials due to weaker Chinese economic output, and the ensuing downturn of raw material related currencies, has come to a halt. In some cases, the tables have turned, and the US Dollar has been losing ground to many of its peers, after reaching near historic heights. This could be due to a number of reasons. However the slowing pace of planned Fed rate hikes is likely to be the most influential factor. It seems that the markets overestimated the effect of planned rate hikes, and priced them in a little bit too early. read more…

Oil Recovery Delayed By Middle Eastern Feud

A meeting between OPEC and non-OPEC oil producers on Sunday April 17^th to freeze oil output, was supposed to be a done deal. Saudi leadership had other plans in mind apparently. Following a rarely seen level of understanding between OPEC and Russia in negotiations leading up to the meeting, the Saudis shocked oil markets with their decision to bolt, due to their power struggle with Iran. Since the Islamic Republic has declared that it will keep on increasing output until it reaches 4 million barrels of oil per day, the Saudis ultimately made a pragmatic play to counter the move, postponing the recovery of oil prices.
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