News

On Wednesday the markets were even more filled with negativity. In Europe, they can’t agree on assistance to the affected companies. Every member of the European Union wants a tasty piece of this money pie. The U.S. is fighting the fears of an economy getting out of quarantine prematurely.

Dow Jones

Wednesday is filled with statements of monetary policy decision makers in Europe and the USA. George Powell criticized Donald Trump’s proposal for negative interest rates. In his opinion, the Fed has good tools for further action. Apparently, the rally in the US market is over and the indices will correct further. The S&P500 is losing significant 2% and is even further away from the beloved 3000. However, ECB Vice President Luis de Gindos believes that the worst in Europe is over, but the consequences of the epidemic will have to be addressed for at least two years. However, European traders do not really believe such statements. DAX index is losing 2.56% on Wednesday. The banking and automobile sector is in the lead of the decline. So far, all views are on the U.S., which is where the trend for growth or decline is coming from. So far, the growth is not visible.

BRITISH POUND

The UK GDP data was slightly better than forecast, but it had almost no impact on the price of GPB/USD pair. On the background of the strengthening dollar, the pound has no strength to fight at all, given the falling British economy. Now the risks for the pound are increasing. If the U.S. Federal Reserve still decides on negative rates, then most likely other banks will have to do the same. In this situation, the fall will continue, given that many investors already now consider the pound overvalued. Level at 1.22 remains the last support before the move to 1.14. In the current situation, it is better to observe the development of the situation on the sidelines.

Oil

OPEC on Wednesday lowered its forecast of global oil demand. According to the organization, it should drop by 9m barrels per day, which is about 9% of total production. For oil, the bad sign and even the data on oil reserves, which turned out to be slightly better than the forecasts, were not enough to try the hike to $30 per barrel. So far, the demand and price for oil at the current stage depends only on the lifting of quarantine restrictions and economic recovery.

Gold

Gold can only grow now if there are some serious statements from the highest authorities. It seems that investors are expecting a serious impulse, perhaps very negative news or data, which will send gold above $1730 per ounce.

What’s waiting for us today?

08.00 Consumer price index in Germany for April
10.00 ECB monthly report
14.30 Number of initial applications for unemployment in the United States

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

It seems that the world economy is now analyzing losses and is very cautious about the future. Because of the hasty opening of free movement and the launch of production, the chance of a second wave of the epidemic is very high. Coronavirus infections have started again in Wuhan, and this after such serious quarantine measures.

BTC/USD

Meanwhile, in the United States, Donald Trump is starting to promote his campaign. There are attempts to put pressure on the Fed to reduce interest rates in the negative zone. Such actions threaten government treasury bonds, which have always been a reliable source of income for large investors. In all circumstances, they have always been profitable. So far, the markets have not understood how to evaluate these statements. The S&P500 is not growing, and is trading down near the 2900 level. DAX closed almost at the opening level, losing 5 hundredths of a percent.

Pound Sterling

Today the data on GDP in the UK is released and of course it will affect the pound rate. The forecast is clear that the GDP will fall. The UK is going to extend payments of 80% of wages to people receiving up to 2500 pounds per month until October. It’s going to cost the country £14 billion a month. That’s not a small amount during the crisis. Unemployment is rising in the country, and at the same time, union discontent. It is already clear that it will be long and difficult for the whole country to get out of the peak. GBP has once again come to the lower border of the trade range 1.2250-1.2600, which has been in place since late March. So far, there’s no reason for growth. If the GDP comes out better than expected, we might see the GBP/USD pair growing briefly, but it is unlikely to go further than 1.26.

Gold

Gold stays in the range of $1700 per ounce. On Tuesday, purchases of the precious metal increased slightly due to Donald Trump’s pressure on the Fed and the announcement to limit investment in the Chinese economy. Breaking through the resistance level at 1720 requires good news impulse.

Bitcoin

Just like we wrote at the end of last week, that’s what happened with bitcoin. The large “whales” in the market made a powerful sale as soon as the price for bitcoin reached $10000. The wave of sales was so strong that it lowered the price by more than 20%. Those who have been watching the market move for a long time were already ready, as the patterns of bitcoin growth and decline are often repeated. Halving has taken place. Bitcoin partially recovered on Tuesday and was trading at $8,800. Next, there will be attempts to take the level of $10000 once again, but for this we need another good news.

What’s waiting for us today?

04.00 Decision on interest rate in New Zealand.
08.00 UK GDP
14.30 US producer price index for April
16.30 US crude oil reserves

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

12.05.2020 – Special Report. The Corona crisis is choking the economy worldwide. The Federal Reserve and other central banks are pumping massive amounts of money into the economy. But the real economy staggers from recession to stagflation. The result: a massively pumped-up money supply pours over fewer goods. This threatens Weimar conditions. We will shed light on what this means for investors.

The legend relies on BTC

The loudest warning came last week from investor legend Paul Tudor Jones (PTJ). He founded his hedge fund Tudor Investment Corporation in 1980 and now uses Bitcoin. Which, together with the Halving, gave BTC a boost. PTJ explained that more and more people are coming to appreciate the value of the e-foreign currency, while at the same time confidence in central banks around the world is eroding.

Great Monetary Inflation

PTJ has listed some good arguments: For example, since February 2020, 3.9 trillion dollars or 6.6 percent of the gross domestic product in the USA have been magically created through quantitative easing. The world is witnessing Great Monetary Inflation – an unprecedented expansion of the money supply. Since February, the Fed’s balance sheet has grown by 60 percent, and by the end of the year it will probably double. And it is not only the USA that is pumping more and more money into the economy: the Bank of Canada has already tripled its balance sheet, and that of the Federal Reserve of Australia has increased by 43 percent. All in all, the debt on the globe is growing massively.

Stagflation ahead

According to the PTJ, there have been only two phases in which M2 monetary growth has exceeded real output over a five-year period: the 1970’s/80’s and the 1940’s. Note from our side: In the first phase, the oil shock stalled productivity and inflation climbed at double-digit rates. In the other, the Second World War was the reason for the decline in production. And this is where the Corona crisis sets in as a massive external shock. The coming decade will resemble the 1970s and bring an era of stagflation, PTJ warned. In other words: high inflation and at best stagnation in the real economy.
The hedge fund manager also argued that the flare-up of the US-China crisis will tear apart global supply chains and ultimately spill over into the prices of goods – wiping out two decades of disinflation triggered by globalization. In other words: If cheap products from China are replaced by US products, prices will rise.

Bitcoin as inflation protection

Because of the global flood of money, PTJ had taken a closer look at the cyber currency for the first time. Bitcoin are deflationary due to their design – the amount is capped at 21 million. And then there is portability – BTCs can be carried on a smartphone. Another argument for BTC is the upcoming digitalization, which has been accelerated by Covid-19.
In short: Bitcoin is a great tool to defend against global monetary inflation. BTC inventor Satoshi Nakamoto had planned the same in one of his early statements: “the root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”

Gold, Bonds, Stocks

PTJ considers US government bonds and the Nasdaq 100 to be among the top assets in the global inflation race, and gold remains an attractive hedge against Great Monetary Inflation. With the money supply excesses of the 80s as a basis for comparison, the gold price could rise to 6,700 dollars.

The Everything Bubble

And on Saturday the blog ZeroHedge published an interesting essay by a former economist from JPMorgan – but the author wanted to remain anonymous. Under the less confident title “The everything bubble” the author first looked back on the previous financial crisis: Since 2009, the ultra-loose monetary policy coupled with an increasing macroeconomic supply had led to deflationary tendencies and higher asset prices. In addition, investors were chasing yields at ever higher risk. The result: all-time highs in almost all asset classes before the current bear market began. Monetary policy had learned nothing from this. The question now is how to support systemically important banks, reduce unemployment and prevent riots.

Hyper-Inflation a la Weimar

The only remaining means of the central banks is to print more and more money and create new debts. Then there would soon be an inflation like in the Weimar Republic. This is because global output is stagnating or falling; overall economic demand is falling. And the money supply would rise massively, which would initially support asset prices. Soon, however, energy companies, the retail sector and banks are also likely to experience massive bankruptcies. So even more printed money. So it is only a matter of time before inflation gets out of control.

New selloff at the door

The latest stock market recovery since March is a short-term affair, he said. Nothing has improved – only the emergency liquidity of the central banks. The conclusion of Anonymus: “Expect a new selloff by year end – re-testing the lows of March – because perfidiously the Fed does not yet own enough corporate debt/equity to control asset prices!
The unfortunately not very concrete advice to investors: „Look for uncorrelated asset classes or inflation resistant assets. There is a chance central banks will own a good part of cross-sector corporate debt/equity when the dust settles, and inflation starts to go through the roof. “
In other words: a new crisis with a wave of bankruptcies, sell-off on the stock market, another rescue with central bank money, and inflation to take off. The protection: inflation-resistant assets, corporate bonds and those shares that the central banks could soon buy.
The Bernstein Bank wishes successful trades!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Monday for the markets starts with concerns about the second wave of the epidemic in the world. Investors are afraid that the recent rally in the markets has gone too far and it happened in a very short period of time.

USD/JPY

In general, any negative information sends quotes in the free fall, such as the news that the White House recorded cases of coronavirus. Therefore, profits from the last rally can be lost very quickly. Until the world gets used to living in a state of epidemic, markets will storm further. The DAX index is down 0.7%. After the S&P500 index fell at the beginning of trading, investors were able to buy it back. It is still impossible to take the level of 3000.

Japanese Yen

The Japanese Yen could not continue to strengthen itself. With the strengthening of the dollar on Monday, the USD/JPY rose sharply and touched a new two-week peak at 107.7. Optimistic sentiment in the Asian stock markets does not allow investors to go into safe currencies. The pair is likely to continue growing until the nearest support at 108.30.

Gold

In the markets, the correlation between risk assets and refuge assets is once again broken. With the growth of the stock market, the price of gold should theoretically fall, but this does not happen. Only the strengthening of the dollar makes gold yield to the price. So far, gold is almost at maximums and trades at $1700 per ounce. As long as gold is in value and will try to get more expensive.

Oil

Oil is approaching its key technical levels. The coming days will show if WTI oil is ready to change its trend and continue growing in price. The first important level will be $26.76 per barrel. If the price can pass it, it will open the way for $30. It is still difficult to predict whether the oil will be strong enough to recover so quickly.

What’s waiting for us today?

03.30 Business confidence index in Australia
14.30 US Consumer Price Index Baseline
15.00 Speech by FOMC member Bullard

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The week ended with positive movement. Although the US unemployment data was the highest in history, it was not a reason for a sharp drop in the markets.

DAX

Friday wasn’t bad for the market. Everyone understands that the coronavirus epidemic has begun to emerge. Although the unemployment figures are huge, everyone already understands that it’s temporary. Everything must recover in the near future. What has cheered the markets up once again is the talk between the U.S. and China, which has not yet led to anything good. The S&P500 closed at 2920 adding 1.7%, but without taking 3000, the DAX closed at 10890, up 1.35% from the previous level.

Euro

The Euro has been flat for a month and a half now. Moving down, you can expect to break through one of the levels. It is either down at 1.0760 or up at 1.0970. It is difficult to calculate anything for the Euro, as there is no specific information from the ECB. The price moves in a range and it is very difficult to predict. The Euro is waiting for Europe to emerge from the epidemic. Probably, in the near future we will see an exit from this range.

Gold

At the auction on Friday, gold quotations remained virtually unchanged. The day was low-volatile, it seems that speculators are just coming out of the asset that does not want to move in either direction.

Oil

Oil keeps growing. The world’s reserves are starting to fall, and this gives an opportunity to turn around the market. It is not clear how much oil there is or how long it will be extracted. Fuel is getting cheaper all over the world, and WTI oil is $25 per barrel.

What’s waiting for us today?

00.45 Volume of retail sales by electronic cards.
10.00 Volume of industrial production in Italy.

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The first trading week of May will end on Friday. Throughout the week, we watched the world cool a little bit from the Coronavirus Pandemic news flurry and the economy learn to live in the new realities. There is still a long recovery process ahead, which is already slowly beginning to gain momentum.

BITCOIN

On Thursday, we learned that more than 3 million new jobless people were added to the U.S. over the week. These are big numbers, but this is the lowest number in 3 weeks. Probably, investors have already put the pessimistic unemployment forecast into their trading strategies, so investors did not react much to these data. What they will care most about is how fast the USA will recover from the crisis after the recession. Markets on Thursday were trading in a positive mood. DAX rose by 1.44%, while S&P500 is pulling out technology and communications again. It is up 1.4%, but still below 3000.

Euro

The Euro rebounded from the support at 1.0760 and is consolidating near the level of 1.0830. Now most of the currencies are under observation and are not making strong price movements. The Euro is still weak and will remain so until there are signs of economic recovery in Europe. The German court also had some influence on the Euro, which started the process against ECB in a very difficult time. Instead of thinking about how to get the economy out of decline more quickly, Christine Lagarde should answer to the German court and explain her actions.

Gold

There’s no way gold can get out of the side. On Thursday, there is another attempt to consolidate above $1700 per ounce. Gold doesn’t have enough good news background to try to reach the historic highs. The relative strengthening of the dollar and the weakening of the quarantine measures are holding back the precious metal’s rise. So far, the growth forecast is not canceled. The situation in the world has not become better and the quarantine result will be seen later, when the companies that cannot be saved will go bankrupt.

Bitcoin

On Thursday, the first cryptocurrency broke through 9500 with a strong movement and quickly reached 9800, which is so close to the coveted $10000 for 1 BTC. Almost all crypto media are hipped in the upcoming halving and this has a big impact on demand. But we know that the bitcoin market is unstable and can move in the opposite direction at any moment. According to the analysis of “whales” wallets of the crypto market, we can see that they have stopped accumulating bitcoins and are most likely prepared to sell on highs. This is an alarming sign, because usually at such moments, a large number of coins are drained to the crypto beginners who buy on the news, and the price falls quite low and fast. In the face of serious growth, it would be worth refraining from buying cryptocurrency at this time and watching the hustle and bustle of halving.

What’s waiting for us today?

13.00 Trade balance in Germany
14.30 Change in the number of non-agricultural employment in the United States
14.30 US unemployment rate

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

Wednesday was almost nothing different from the last two trading days. There’s still the same tension in the world between the US and China. The struggle against the coronavirus continues and countries are doing much to get back to work and economic recovery faster.

USD/JPY

Against the backdrop of the epidemic in the U.S. securities of the pharmaceutical companies are growing very well. The news about the imminent emergence of the vaccine only warms up investors. But it is very difficult for the whole market to grow further. The S&P500 index is stuck at 2860. Only the dynamics of shares of electronics giants does not allow to fall and systematically adds 0.5-1% to each trading session on the background of a return to life after quarantine.

Euro

The euro can not yet cope with the problems of the European economy, as well as the seriously strengthening US dollar. The price of the pair EUR/USD continued its systematic downward trend down to 1.0760, which we mentioned in yesterday’s article. The Euro is almost always approaching strong levels closer to the publication of important macroeconomic statistics or news. This time the price is already close to Friday. The Euro has no strength for growth and now it will be important for the European currency to stay above the support line and keep its place in the current trading range 1.0950 – 1.0760.

Japanese Yen

The USD/JPY pair has a very good downward movement, which indicates how stable the Yen feels during a pandemic. After all, the tension between the USA and China in some way went into the hands of the Japanese currency, as it has always been considered as a refuge currency, but if the tension goes down, then this strengthening of the JPY is likely to stop. On the whole, the pair is already ripe for reversal upwards. The level of 106, at which it is now quite strong, and this reversal may begin in the coming days, considering that we are waiting for a lot of macroeconomic statistics on Friday.

Oil

On Wednesday, the data on crude oil reserves were relatively good, but they were a little late for markets. It happens that the price flies up much faster than traders get important information for making decisions. In our case, the stocks were not as good as the market thought they were. As a result, WTI oil on Wednesday is cheaper by almost 2% and trades at $24 per barrel. We still have to wait for the news on production decline and for Friday macroeconomic statistics. It is likely to go down for a slight correction to cool the bulls’ fervor.

What’s waiting for us today?

08.00 Decision on interest rate of the Bank of England
13.00 Minutes of the meeting of the Monetary Policy Committee of the Bank of England
14.30 Number of initial applications for unemployment benefits in the United States

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

In Europe and the United States, the number of deaths from coronavirus infection is steadily declining. Countries are beginning to emerge from quarantine and launch their economies. Such actions lead to an inevitable increase in demand for risk assets, and we see appetite growing on all stock exchanges.

WTI

Overall, the markets are starting to feel good. Investors are already trying to plan their activities, although there are sharp statements from the U.S. to China, as well as possible details about the origin of the coronavirus. On Tuesday, American markets have grown quite well. The S&P 500 came back to 3000 and added 1.9%, the DOW rose by 1.5%. The European market showed excellent positive dynamics. The DAX closed at 10729, adding 2.51%. Europe is feeling the spirit of recovery and this is very positive for the general condition. The Europeans are trying to get out of quarantine faster, to continue living and making money.

Euro

On Tuesday, after the Supreme Court of Germany approved ECB bond purchases as part of the quantitative stimulus, EUR/USD quotes increased volatility sharply and went down. The ECB has allocated huge amounts of money to stimulate the economy. Its asset portfolio has grown by 40% since 2014. Even though Christine Lagarde said that the economy is beginning to recover very slowly, there are still very strong concerns about the second wave of diseases, which may put the European Union into recession even further. In the near future, the Euro has no chance to withstand the strong US dollar. Probably, the pair EUR/USD will be looking for support at the level of 1.0760, which it could not pass in late April.

Pound Sterling

GBP continued its decline on Tuesday after the unsuccessful high on April 30 and traded at 1.2430. So far, all the focus is on the meeting of the Bank of England, which may hint that it will continue to support the economy with all its might. The whole of 2019, even if you do not take into account the pandemic, was not very successful for England in terms of retail sales. It was all the fault of reduced consumer spending. The announcement of a new QE, which is more likely the Bank of England will do, will be a negative factor for the pound.

Oil

The oil market is coming to life very quickly. A sufficient number of speculators are coming in now to make money in a collapsed market, but a number of factors, such as declining reserves and declining production in a number of countries, show that, overall, the market is not going to give up. On Wednesday, we are waiting for the data on oil reserves in the U.S., from which traders will be repelled in the near future. On Tuesday, WTI oil rose by almost 20% to $24.4 per barrel.

What’s waiting for us today?

10.30 UK Construction Business Index
14.30 Change in non-agricultural employment in the USA
16.30 US crude oil reserves
16.00 US Purchasing Managers Index for Non-productive Industries

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

05.05.2020 – Special Report. BTC has almost doubled since the corona crash in March. No wonder: Halving is coming soon. The community is betting on big profits. And the Bitcoin disciples are firing up the course with fantastic price targets. Get in or not? We shed light on the background.

Halving probably in a week

It can happen that fast: The most popular and oldest cyber currency is heading for the $10,000. The reason for the new interest is the upcoming Bitcoin halving. The “BTC-Echo” commented, the third halving also awakens new interest in the e-currency. After the two previous splits, the prices had risen further. It is still not quite clear when exactly the halving will happen, since the amount of Bitcoins depends on the miners. “The shareholder” explained that the date for this is probably May 12.

Price target of $300,000 at BTC

And what a coincidence: right now the disciples are cheering the buying frenzy in the congregation. Finanzen.net, for example, recently let Preston Pysh have his say. Pysh is the founder of BuffetsBooks.com and the Pylon Holding Company and has built up a large following in the social media. And he sees a long-term price target for BTC of up to $300,000 – with fluctuations in between. By the next Halving in four years, Bitcoin will be between 80,000 and 100,000 US dollars.

Push through halving, inflation and new acceptance

In any case, Pysh considers the current halving to be a massive price driver. Another argument is the weakness of the greenback he sees. He referred to the trillion-dollar aid campaigns in the USA in the fight against Corona. Furthermore, he expects a growing acceptance in the mainstream due to inflation worries.
We add: The issue of inflation protection cannot be dismissed – this is exactly why gold is in demand. Investors worldwide are longing for an asset whose intrinsic value cannot be eroded by monetary policy. However, the question arises whether – apart from the gambling community – criminals are currently investing in cyber-currencies, as they want to avoid the surveillance of commercial banks. Moreover, the world’s central banks could at some point eliminate the uncontrollable, annoying rival in the currency world.

Harder than gold – BayernLB sees USD 90,000

But Bayerische Landesbank also caused a sensation last September with an extremely bullish analysis. The bank examined the so-called stock-to-flow rate of Bitcoin in comparison to that of gold. This SF rate is the “hardness” of an asset. According to this, there is a limited supply of gold, which is increasing only slowly. To the currently known 187,000 tons of gold worldwide, about 3,000 tons per year would be added. The ratio of the gold stock (stock) to the growth quantity (flow) is thus about 1.5 percent. After the current third halving, this rate will be much lower for Bitcoin than for gold. This means: “Bitcoin could become harder than gold.” For this year, the bankers saw a price of $90,000.
And BayernLB added that the next halving would be in 2024. Then the hardness level would double again. In their study, however, the analysts qualified that even the best statistical models can fail in their forecasts. Therefore, the current Bitcoin halving will be an endurance test for the stock-to-flow model.

This is what halving is all about

The fact is that the upward volume growth of Bitcoin is slowed down every four years until it reaches zero. The “BTC-Echo” explained exactly what “halving” is all about: The Bitcoin block chain is a kind of database that, very simplified, can be thought of as an Excel file with many pages. This table stores information about transactions with the Bitcoin, such as when a certain number of transactions are transferred from A to B.
To update this information in the Bitcoin block chain, which runs on thousands of computers worldwide, and to encrypt its contents in an unmanipulable way, these computers use complicated mathematical formulas. The operators of the Bitcoin block chain’s IT networks receive a reward for this work. Once they have calculated a block and cryptographically encrypted it, newly created BTCs are distributed to them. Exactly this amount is halved from 12.5 BTC to 6.25 BTC.

Half reward for the same work

It is therefore not the number of Bitcoin that is halved, but the wages paid to the “miners” for the creation of new BTCs. Just as much work, half the profit = decreasing incentive, reduced production, less strongly increasing supply. Currently there are about 19 million BTC. This number will rise more slowly after the halving, judged “BTC-Echo”. And thus, theoretically, stable or growing demand with a slower growing supply could theoretically lead to rising prices.

Final cap at BTC 21 million

And there is another potentially bullish fact about supply. “Computerbild” added that Bitcoin inventor Satoshi Nakamoto had set the maximum number of coins in development at 21 million units. No matter how hard Miner tries, it doesn’t go beyond that amount. In order to delay reaching the maximum number of coins as long as possible, the so-called “halving” takes place every four years.
Our conclusion: The BTC bulls currently have some arguments on their side. The interest is growing. Bitcoin could theoretically become as attractive as gold, which has no use whatsoever apart from its function as jewellery and yet has been in demand for thousands of years. However, the fact that an uncontrollable secondary currency is a thorn in the side of politics is a major problem for BTC.
The Bernstein Bank wishes you successful trades and investments!

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.

The conflict between the US and China is breaking out. The U.S. government openly states that China has allowed coronavirus to leak from a laboratory in Wuhan and that they have evidence of this. The current very difficult situation in the U.S. markets is aggravated by another round of trade war.

DAX

Monday was again negative for stock markets. The DAX index lost quite a lot, 3.6% due to investors’ fears about a new trading war between China and the USA. American indices closed in the opening area. Quarantine and closed productions in Europe do not give clarity to investors. Equity markets will remain volatile as investors are looking for a balance between economic statistics, weakening quarantine measures and new vaccines to treat coronavirus. Probably, the U.S. stock market will follow the statements of politicians very closely. Many analysts are tending to fall, as the economy is still very far from recovery from the crisis.

Euro

The Euro bounced back from 1.0970 on Monday. The situation in Europe is critical, so the strong growth is not worth thinking about yet. Now many companies will be flooded with huge money just to save them from bankruptcy. All the attention this week will still be focused on Friday and on the US unemployment applications. So far, the euro is forming a side channel where one can try to work from borders.

Gold

Monday was positive for gold. Due to the decline in the stock market, the precious metal is popular again. Gold passes the level of $1700 per ounce and goes to the upper limit of the $1730 range. To go higher, you need a strong momentum, which is likely to be on the important news. After fixing above 1730$, it will be possible to look at the exit to the level of $1800 per ounce, where the next strong resistance is located.

Oil

It seems that the measures taken by different countries to contain the price of oil are beginning to work. On Monday the price of a barrel of WTI oil is rising to the level of $22.2. On May 5, the Texas Commission will hold a meeting to vote on the reduction of oil production. The price is now looking for a balance between supply and demand. Traders expect gradual withdrawal of countries from quarantine, which in turn should spur the demand for oil. One problem is that this withdrawal process is very slow.

What’s waiting for us today?

06.30 Decision on interest rate in Australia
09.55 UK PMI Composite Index for April.
16.00 Supply managers index for the US non-production sector

Important Notes on This Publication:

The content of this publication is for general information purposes only. In this context, it is neither an individual investment recommendation or advice nor an offer to purchase or sell securities or other financial products. The content in question and all the information contained therein do not in any way replace individual investor- or investment-oriented advice. No reliable forecast or indication for the future is possible with respect to any presentation or information on the present or past performance of the relevant underlying assets. All information and data presented in this publication are based on reliable sources. However, Bernstein Bank does not guarantee that the information and data contained in this publication is up-to-date, correct and complete. Securities traded on the financial markets are subject to price fluctuations. A contract for difference (CFD) is also a financial instrument with leverage effect. Against this backdrop, CFD trading involves a high risk up to the point of total loss and may not be suitable for all investors. Therefore, make sure that you have fully understood all the correlating risks. If necessary, ask for independent advice.