Bond Bearings; South Korea Crypto Ban?
Mati Greenspan | Jan 11, 2018 06:59AM ET
When trying to determine the value of any asset, most investors listen very closely to what people think about the asset in question.
For example, in the crypto market, John McAfee, famous for creating the McAfee antivirus in 1987, likens himself to a virtual G-d, and is able to conjure up price action on any specific cryptocurrency he chooses with a single tweet.
Today, the cryptomarket is reeling over the latest prediction from the most famous investor on the planet, Warren Buffett, who believes that all cryptocurrencies will end badly.
He added that he would not take a short position on bitcoin futures but expressed that over 5 years he believes the market will fall. What stuck out for me is when he admitted that he did not understand bitcoin or blockchain. Well, that makes sense.
As with Buffett, the CEO of Goldman Sachs Lloyd Blankfein says that he frequently does not understand new technologies and many times misses these type of trends. About a week after Lloyd's statement Goldman announced that they would in fact be offering bitcoin futures to their customers.
The Dean of Valuation at New York University responded by saying that Buffett's comments painted the entire industry with too broad a brush stroke. In fact, there are thousands of cryptocurrencies in circulation at the moment and to say that none of them have a future just doesn't make much sense.
On Tuesday, the CEO of JP Morgan admitted that he regrets calling Bitcoin a fraud. So I'm sure the Oracle of Omaha will come around too he just needs a bit more time and exposure. I am a firm believer in the fact that it is possible to teach an old dog new tricks.
Today's Highlights
Bond Bearings
Watch Oil Closely!
South Korea Crypto Ban?
Please note: All data, figures & graphs are valid as of January 11th. All trading carries risk. Only risk capital you're prepared to lose.
Traditional Markets
The weakness in the bonds markets that we noted yesterday does seem to be impacting the markets by now. The awesome momentum that we've been seeing in the stock market so far this year seems to have been restrained and Wall Street closed yesterday with some minor losses.
Legendary Bond investor Bill Gross seems to think that the action we saw so far is just the beginning and we may well see further selling in this increasingly volatile market.
Get The News You Want
We should also be watching the price of Crude Oil very closely at this point. The technical pattern on the chart indicates that we might be in for a breakout above $63.50.
The stabilization of oil prices has been a core factor contributing to the record low volatility in the stock markets over the last year. So now that it's testing new ranges the markets may need to make some readjustments going forward.
Also, we await a critical decision from the Trump administration regarding Iran's nuclear program and connected sanctions. Trump is no friend of Khamenei or Rouhani and is certainly not pleased with the harsh crackdown on the recent protest movements. So we'll need to see what he's got in mind.
Of course, most of you are probably interested in an entirely different crackdown that's happening elsewhere at the moment...
South Korean Crypto Ban
The latest decline in cryptocurrencies is being fueled by updates from South Korea. As we know, SK is the biggest cryptotrading nation on the planet so reports that the government may be preparing to ban cryptocurrency activity in the country is likely bringing things down a bit.
Recently, the government put out a bill that bans anonymous crypto accounts and gives regulators more power over local exchanges. This latest proposal is to squash the entire industry. Yesterday, tax authorities raided a few of the major exchanges including Coinone and Bithumb so the situation on the ground is tense.
The market does seem to be affected here with prices of Bitcoin, Litecoin, Dash, and Ripple all down today. Ethereum remains the only safe haven both because of it's establishment of a network but also because exposure in South Korea seems to be lighter in comparison to other cryptos.
However, even though the Justice Ministry is doing their best to push this proposal through, it still would need to pass a vote in parliament.
Given the popularity and extreme exposure of her citizens, it's difficult to imagine the government actually passing such a law. Still, it is a possibility that's on the table so caution is advised.
No matter what happens, just remember that China was dominating the market a year ago with 90% of the volumes coming from Chinese exchanges. The heavy hand of the People's Bank of China did cause the markets to dip but they have since recovered. As the German Philosopher famously said, "whatever doesn't kill you, makes you stronger."
As always, let me know if you have any questions, comments, or any other feedback. I'm always glad to hear it. Come tag me on Twitter any time.
@MatiGreenspan
eToro, Senior Market Analyst
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