By Rubika Ventures® on The Capital
To date, the mainstream media only talk about the decisions of the FED and the United States regarding the new planning of the interest rate. In our community, we know that this type of news can also affect the cryptocurrency market both positively and negatively. Hence the importance of always being in the sights of possible scenarios.
May Affect The Dollar Worldwide
As explains by veja.abril, successive economic measures by the Trump administration to curb Coronavirus damage in the American economy and social instability in the country have lit the yellow light for the melting of the dollar worldwide. As an example, since May 13, the real has gained 15% in value against the US currency — today it is trading at 4.90 reais.
For the second half of 2020, an injection of exorbitant 2.9 trillion dollars (the equivalent of 14.21 trillion reais today) into economic stimulus packages has already been approved.
To give you an idea, Brazil’s GDP for 2019 was 7.3 trillion reais, almost half the size of the American stimulus. For this reason, the market looks forward to the end of the FOMC meeting, the Federal Reserve group that provides for interest rates and the money supply in the United States, which should take place this Wednesday afternoon, 10.
The expectation in itself is not about interest, which should maintain stability (between 0.25% and 0%, the current range). What motivates the market is the speech by Fed Chairman Jerome Powell, with signs that high amounts of money are yet to be made available to investors in purchases of public and private debt securities.
Although this palliative remedy is important for keeping the United States economy devoured by the virus healthy, it can raise the temperature too much and trigger dangerous side effects.
The economy is a living organism and adjusting the exact dose of the prescribed drugs is essential to avoid unbalancing the system. Injecting large dollar sums destabilizes, for example, the vital balance of the supply and demand system, which can lead to inflation.
The mechanism has been adopted by the Trump administration even before the pandemic, in a reversal of Obama’s fiscal adjustment trend. With the increase in public spending spent in the Covid-19 crisis and the fall in tax collection, the country’s fiscal deficit will grow, an important indicator of its healthiness.
Risks Must Be Taken
Despite the risks, says the news, the American body is strong enough to withstand the streak of these injections. As the dollar is the main reserve currency on the planet, accounting for approximately 80% of all international transactions, it finds enough channels on its way to absorb it.
“It is as if the country were a major exporter of money and importers are spread all over the world,” says André Sacconato, partner at consultancy Integrare and economic consultant at Fecomercio.
On the one hand, all emerging currencies, except Turkey, had this dynamic, on the other hand, the depreciation in the dollar was not sharp since investor demand ends up offsetting the increase in supply. Brazil’s, for example, fell 18%, from 5.93 reais on May 14 to the current value of 4.90 reais.
Although personal savings increased significantly during the pandemic period due to unemployment and fear of the population, which increases the cash available, the main concern is that it is not large enough to overcome the US deficit, which has grown 5.7 times in April compared to the first quarter of the year.
“The surplus is going to be very small in relation to the total amount of the deficit and you will have to use a lot of monetary issues to offset expenses,” says Sacconato.
Government Budget Deficits
The US Congressional Budget Office predicts that government budget deficits could skyrocket to 17.9% of US GDP in 2020. Thus, domestic savings, impacted mainly by government savings, may be negated in unprecedented records, from — 5% to -10% of national income.
“The growth of the deficit in the United States is not frightening, because there is no increase in the risk of default, as in emerging countries. Rich countries take this very seriously so as not to scare away investors, ”says Paulo Feldmann, professor of economics at USP.
Despite optimistic predictions, there is a latent risk, as certain as death: like any living organism, the American economy has limits and its vigor will depend on the extent of the pandemic in the country.
While the world is rooting for the emergence of the vaccine, investors rely on the efficient and proven remedies of American monetary policy, which since World War II and the Marshall plan, have guaranteed the hegemony of the dollar, as concludes the news.
The FED Final Decision
As wrote by infomoney, The Federal Reserve decided on Wednesday (10) to keep interest rates in the United States in the range between 0% and 0.25% per year, further indicating that rates should remain at this level until at least 2022.
Along with the decision, Fed officials projected that the US economy will shrink 6.5% in 2020 because of the impacts of the new Coronavirus pandemic. On the other hand, the expectation is that the Gross Domestic Product (GDP) in 2021 should show a gain of 5%, followed by an increase of 3.5% in 2022.
The US Central Bank also echoed the speech at the April meeting, saying that “it hopes to maintain the targets until it is certain that the economy has withstood recent events and is on track to achieve its maximum employment and price stability targets.”
The Fed also said it will continue to increase its holdings in bonds, targeting Treasury purchases at $ 80 billion a month and mortgage-backed securities at $ 40 billion.
In addition to the statement, this month the Fed also released its new projections. In the case of interest rates, in addition to pointing to the current level until 2022, the authority also projected a rate of 2.5% in the long run.
As for the unemployment rate, the targets are 9.3% this year, 6.5% (2021), and 5.5% (2022), while inflation is expected to rise from 0.8% in 2020 to 1, 6%, and 1.7% in the next two years.
Reverse Funds Being Digitized
We will anticipate all the babies on the market who only want to know how to invest in altcoins and flee the derivatives market. We have to affirm it, what is going to make the cryptocurrency market explode will be the emergency funds and the Exchange Trade Funds (ETFs) that will soon be listed during this new economic cycle that can last approximately four years.
As you did know coindesk and etfstream, the London-based investment firm ETC Group plans to list bitcoin-backed security on the German electronic trading market later this month. The market reacts to the news ghostly and we can see that with the latest movements made by Bitcoin.
Bitcoin-backed security will be available in Germany and has also been passported to the UK, Italy, and Austria, meaning users in these countries will be able to hold or trade the BTCE shares, concludes the news.
Derivative Markets Are The Fashion
With this news and our personal opinion, we must be aware of what is happening right now and much more after the recent Cryptocompare report came out, where it states that Crypto derivatives continue to gain market share against spot markets.
In May, derivatives volumes hit a record of $ 602B (32% of the market), while total spot volumes hit $ 1.27T, says the report.
Institutional Investors With Great Interest
Recently criptonoticias published a journalistic matter where he explains that nearly 80% of institutional investors see digital assets as attractive. The overwhelming majority of institutional investors are interested in digital assets, according to the findings of a survey by asset management giant Fidelity.
The study, which covered about 800 investors in the United States and Europe, found that approximately 80% of institutional investors detected something attractive about the emerging digital asset class. This study also found that more than a third of such investors had already invested directly, or indirectly, in the market.
According to Bhutoria, investors found the uncorrelated nature and high upside potential of digital assets as particularly attractive.
Compared to 2019, the share of U.S. investors holding digital assets increased from 22% in 2019 to 27% this year. However, there are still various obstacles that institutions face when investing in the market, including price volatility, lack of rationale for determining appropriate value, and market manipulation.
Bhutoria claimed that the current macro-driven interest in bitcoin could be short-lived unless service providers offer the necessary tools to overcome such obstacles. Native crypto companies such as BitGo and Genesis Global Trading recently announced new first-class services to help investors navigate the market. For its part, Fidelity Digital Assets offers execution and custody services for professional investors.
More investors have also assumed exposure to derivatives, according to the survey. The percentage of U.S. investors with exposure to cryptocurrency futures increased from 9% in 2019 to 22% in 2020.
DEX Tokens Return
Additionally, Messari explains that the Native tokens of nearly every decentralized exchange are dramatically outperforming those of major centralized exchanges.
Just about every single one of the six largest DEXs by volume is up more than 100% on the year. This includes well-known tokens like Kyber and Bancor as well as some under the radar tokens such as Airswap, Loopring, and IDEX.
Centralized exchange tokens are still up on the year but only in the mid-double digits with the exception of OKEx (OKB) up 108%.
Part of this trend could stem from the fact that centralized exchange tokens are orders of magnitude larger and more liquid than their counterparts, allowing for small fundamental changes in DEXs to cause larger price jumps.
Nevertheless, it is evident that DEXs are seeing heightened interest with two major trends are playing out:
- DEXs are comprising a larger percentage of overall trading volumes
- Major DEX upgrades have or will occur in the near future to further narrow this gap
Rising DEX Volumes
Daily spot volumes on DEXs have risen from less than $5 million at the start of the year to around $25 million. Not only is the total DEX volume rising, but it’s doing so at a more rapid pace than centralized exchanges.
Percentage of overall volume has increased from 0.25% to 0.5% YTD.
All this tells us one thing: investors are seeing the digitization of things every day but in proportion to using less bureaucratic decentralized tools.
The Feeling That Everyone Wants
Even at the beginning, we put the news that could affect the financial markets in the coming days, it is excellent to see that in the recent report of sfox indicates that most of them are kept in a half bullish feeling.
In sports, the homogeneity that the markets are having in relation to volatility is explained, along with the indirect correlation
Ethereum With High Hopes
A lot of positive news is heard around Ethereum and we believe that really for the next few years this platform will reach many mountains, so it can be said that we can have high hopes together.
Performing a weekly review of Ethereum we can see that on the positive side we can go to test the EMA100 at 264.73, which is following the trend line of primary decline that serves as resistance.
The indicators are already beginning to show a correction trend but with fundamentals of trend continuity.
Indicators only show laterality with a tendency for an upcoming correction.
See you in the next story! With love 💛 Rubika Ventures® Team!
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Controversial Outlook For Financial Markets News Compilation was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.