If you were forwarded this newsletter and would like to receive it, sign up here.
TODAY:Prices: Bitcoin (BTC) $7,390 (+0.45%) | Ether (ETH) $173 (+1%) Bitcoin has clawed back losses from the coronavirus selloff. With year-to-date returns now turning positive, crypto hedge funds are sharpening their pitches News and analysis: Bitcoin gains vs. S&P 500 losses, China's renewed digital yuan push and some thoughts from CoinDesk's Noelle Acheson on (real) gold
Assembled by the CoinDesk Markets Team, First Mover aims to start your day with the most up-to-date news, analysis and sentiment on bitcoin and cryptocurrency markets. We’d also love to hear what you think. What's good or bad, and how could this newsletter be even more useful to you? Feel free to let me know at [email protected]– Bradley Keoun, senior markets reporter.
MARKET MOVES
Bitcoin traders are used to the mood swings that come with extreme price volatility. They were elated when prices shot up 30 percent in January, the best start to a year since 2013. They were alarmed and unsettled when the spread of the coronavirus sent prices for the oldest and largest cryptocurrency plunging as low as $3,850 in early March from about $10,200 just a month earlier. Now, volatility is returning in a positive way, prices are going up, and enthusiasm is returning to digital-asset markets. Bitcoin has nearly doubled since hitting the March low, and a 7.8 percent rally on Monday brought the cryptocurrency back into the black for 2020. As of early Tuesday, prices were up 4.25 percent on a year-to-date basis. Source: TradingView Clawing back to that threshold represents a milestone for bitcoin, since the latest coronavirus-triggered selloff was one of the cryptocurrency's biggest crises since it was launched in early 2009. Holders are hoping that the recent price recovery will attract the notice of mainstream investors, in turn driving more demand for bitcoin. But it also could prove a boon for the marketing efforts of hedge funds and other investment firms that specialize in digital assets, as they seek to woo new institutional clients. Leaving aside the question of whether bitcoin is a safe-haven asset like gold or Swiss francs, most investors in any asset class would likely be thrilled, given what's happening right now in the economy, just to get back what they've lost since the start of the year. That can't be said for the Standard & Poor's 500 Index of large U.S. stocks, which remains down 18 percent in 2020 despite its spectacular rally over the past few weeks. The positive year-to-date performance just bolsters the pitch for bitcoin in the current environment; many investors in both digital-asset and traditional markets say inflation will likely follow the trillions of dollars of fiscal and monetary stimulus deployed just in the past month by governments and central banks around the world. And bitcoin, sometimes referred to as "digital gold," is bought by many investors as a new-economy way of hedging against inflation. Here's how San Francisco-based Bitwise Asset Management put it in an April update:
"We are in unprecedented times, seeing anomalous and unexpected developments in financial markets, including gold, and witnessing extraordinary fiscal and monetary responses to the coronavirus pandemic. In such an environment, a small allocation to crypto in a diversified portfolio seems increasingly prudent. We are hearing this from clients, and seeing it in our inflows. If considering a small allocation to crypto has been on your to-do list, now may be one of the best possible times to prioritize figuring out your stance." [Emphasis added.]
And bitcoin's outperformance is becoming a regular thing. Over 2019, bitcoin surged 94 percent. That was roughly triple the returns that the S&P 500 notched during a banner year for the stock index. In hindsight, it may have been the bull market's final push. Michael Novogratz, a former Goldman Sachs executive who's now CEO of the cryptocurrency investment firm Galaxy Digital, told CNBC last week that he was fielding calls from investors who have never dipped into the nascent market. According to Novogratz, they all have the same request: "Tell me about this bitcoin."
Blockforce Capital, a cryptocurrency investment firm in San Diego, said Tuesday in an emailed report that its Multi-Strategy Master Fund lost 14 percent in March, while quickly noting (at the top of the document) that performance was essentially flat for the year. While the firm said "cryptocurrencies will remain volatile and widespread institutional adoption will take a very long time," confidence remains.
"We believe that we can achieve superior risk-adjusted returns that are uncorrelated to the other investments that so many of our clients already own." – Blockforce Capital
An interesting development over the past week is just how many highly respected old-line Wall Street analysts – even those who don't follow bitcoin closely – are now predicting a pickup in inflation. Rich Bernstein, a former Bank of America chief U.S. equity strategist who now runs his own advisory firm, told Barron's on April 3 that he sees stagnation ahead for the economy, if not "stagflation" – where low or flat growth comes at a time of rising consumer prices and high unemployment.
"When you think about the amount of stimulus that is being put in the system worldwide, it seems to me that's a reasonable proposition that you can have more inflation than people think," Bernstein said.
And there's Michael Wilson, a Morgan Stanley equity strategist, who wrote in an April 5 report that "there are literally no governors on the amount of monetary or fiscal stimulus that will be used in this fight." He continued:
"Not only are we likely to get the largest peacetime fiscal deficit in history, but the stimulus targets the parts of the economy with a higher propensity to spend. Such a dramatic shift in U.S. fiscal and monetary policy relative to other regions should lead to a materially weaker dollar."
President Donald Trump's top economic advisor, Larry Kudlow, has told CNBC that not only is he in favor of selling government bonds to "raise money for the war effort," but that "you have fiscal policy working with monetary policy." The takeaway is that, as authorities respond to the pandemic, the U.S. central bank can be called on to provide whatever financing is needed for whatever spending programs the government pursues. Usually, the Fed acts independently of the government. With such stark declarations, it's no wonder that crypto traders are banging the drums. Rich Rosenblum, a former Goldman Sachs managing director who now leads the markets group at the digital-asset trading firm GSR, said in an e-mail that bitcoin's swift selloff in early March was driven by "non-crypto-dedicated professionals moving risk off the table, starting with liquid assets and regardless of conviction level." The group was "largely made up of traditional institutions" that needed to raise cash fast to meet margin calls and quarterly redemptions, he wrote. In other words, they weren't EVEN bitcoiners. For those still in the game, or getting in now, the investment case has strengthened. "The record stimulus being deployed by central banks is a reminder of why bitcoin was created in the fallout of the last global market crisis," Rosenblum wrote. "People are increasingly skeptical of conventional monetary systems. Bitcoin with its predictable inflationary scheme and 100% uptime offers some certainty in an environment that is otherwise very unpredictable." Here's another approach: Just say bitcoin's returns are positive for the year, and that the cryptocurrency is beating the S&P 500 handily, for the second straight year. If the inflation narrative doesn't work, that just might. – Bradley Keoun, Senior Markets Reporter
Tweet of the day
BITCOIN WATCH
BTC: Price: $7,390 (BPI) | 24-Hr High: $7,459 | 24-Hr Low: $7,062 Trend: Bitcoin printed a 3.5-week high of $7,459 early Tuesday, taking the cumulative month-to-date gains to 15 percent. At press time, the cryptocurrency is trading near $7,380, representing a 3 percent year-to-date increase. While bitcoin is again reporting gains for 2020, the S&P 500 index is still down over 17 percent. The cryptocurrency's recent rally looks to be confirming that the rapid drop from $8,000 to $4,000 seen on March 12 and 13 was mainly fueled by non-crypto dedicated professionals moving risk off the table amid the coronavirus-led crisis in the financial markets, according to Richard Rosenblum, co-head of trading at GSR. The long-term case looks bullish, courtesy of the unprecedented monetary and fiscal stimulus launched by central banks and governments across the globe. However, a pullback may be seen in the short run, with signs of buyer fatigue emerging on the technical charts. To start with, bitcoin's upward momentum ran out of steam near the descending 50-day average at $7,370 during the Asian trading hours. Further, key indicators on the hourly and 4-hour charts are reporting overbought conditions. So bitcoin may fall back to the $7,100-$7,000 price range before convincingly rising above the 50-day average hurdle. – Omkar Godbole, Markets Analyst
Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.