PROFIT-TAKING HURTS BITCOIN
Bitcoin’s price has dropped to under $63,000, causing a ripple effect in the broader cryptocurrency market. Alongside Bitcoin, other major digital currencies like Ether, Cardano, and Dogecoin also experienced declines. Traders have been actively buying call spreads at the $100,000 level, indicating a bullish sentiment but not necessarily expecting a significant upward movement in the short term. Additionally, SafePal’s SFP token saw an increase in value as a result of a new staking feature that rewards long-term token holders with points for exclusive benefits. The CEO, Veronica Wong, highlights the aim of aligning the interests of token holders with the project’s growth by incentivizing loyalty and engagement. Despite market volatility, there has been a significant uptake in staking SFP tokens, with over 1.5 million tokens staked from more than 100,000 wallets in just a few days since the feature’s launch. This growth indicates a positive response from the community during uncertain market conditions.
MONEY MARKET FAVORED
Despite impending interest rate cuts by the Federal Reserve, investors are sticking with money markets for their high yields. Bond experts suggest spreading investments into longer-term bonds for potential profit, as cash returns are expected to decrease. Federal Reserve Chair Jerome Powell’s hint of lower rates has spurred some investors to shift money into bond funds. By comparison, the differing returns of bonds and Treasury bills show the importance of a diverse investment approach including equities and cash. Warren Buffett’s Berkshire Hathaway has boosted its Treasury bills holdings to prepare for market shifts, showing the appeal of this type of investment in today’s market. Overall, investors are starting to realize the need to get ready for lower cash returns and are searching for ways to reinvest their money wisely for future gains.
MIXED METALS
Copper prices have increased to their highest point in nearly six weeks as a result of several factors contributing to increased market demand. Anticipation of an imminent interest rate cut by the U.S. Federal Reserve, alongside a weaker dollar and signs of stronger demand in China, have all played a role in driving up copper prices. The expected interest rate cut is anticipated to stimulate growth and demand in the U.S. but could lead to a decline in the value of the U.S. dollar, making dollar-priced metals like copper more affordable for foreign buyers. Furthermore, dropping copper stocks in Shanghai warehouses and an improvement in China’s import appetite, as indicated by the rise in the Yangshan premium, further support the upward trend in copper prices. Moreover, zinc prices have also surged, and this was due to concerns about supply shortages after major smelters agreed to reduce production, leading to a 15% increase since early August. Nevertheless, despite the gains reported for copper and zinc, not all metals are doing so well as lead and aluminium have decreased, with the latter falling as there is less available supply, which has caused the cash contract discount to narrow.
BEARISH OUTLOOK
Wall Street analysts, including Goldman Sachs Group Inc. and Morgan Stanley, are less optimistic about the future of oil prices due to an expected increase in global supplies, potentially from OPEC+. They predict that Brent crude, the global benchmark, will average less than $80 a barrel in 2025. This forecast has been revised down, with Goldman Sachs now expecting $77 and Morgan Stanley projecting a range of $75 to $78. Both banks anticipate that there will be an oversupply in the crude market, leading to decreasing prices over the next year. Recent concerns include slowing demand growth in China, higher supplies from outside OPEC+, and OPEC’s plans to ease output restrictions. Despite current deficits, analysts believe that the crude oil market is likely to reach equilibrium by 2025, resulting in a surplus. Various scenarios, such as flat Chinese oil demand or US tariff increases, could cause Brent crude prices to drop to around $60-$63 per barrel.
INTERNATIONAL NEWS
European and UK stock markets experienced a rise, mainly driven by the mining sector. This increase in stock values also reflected positively on the pound, which has reached a two-year high recently. This surge in the pound’s value suggests further potential gains as options traders have displayed a strong optimism towards the currency’s prospects over the coming month. The risk reversals, indicating the difference between bullish call options and bearish puts, show a significant spread favoring the sterling, representing the most favorable outlook since the start of the pandemic. Market sentiment suggests that the Federal Reserve (Fed) and the Bank of England (BOE) are being viewed in a different light, with expectations that the BOE may ease by fewer basis points compared to the Fed, reflecting the belief that the Fed may act more swiftly in adjusting its monetary policy moving forward. This anticipated divergence in rate paths between the two central banks is influencing market dynamics, with the Fed potentially moving at a quicker pace from this point onward.
