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Bitcoin Peaks at $14K Last Week. The Outlook Remains Positive.

July 10, 2019
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“In investing, what is comfortable is rarely profitable.”
― Robert Arnott

5-Day Change

  • Bitcoin $11,378
    +2%
  • Ethereum $295.0
    +0.8%
  • S&P 500 $2,979.0
    +2.1%
  • Dow Jones $26,850.3
    +1.1%

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Bitcoin peaks at $14,000 before settling around $11,000. The outlook remains positive.

We ain’t seen nothin’ yet...as Bitcoin’s price hits very nearly $14,000 last Wednesday, jumping up 18.2% and of course prompting speculation galore. It didn’t last, however - the price corrected back down to around $11,000 at press time. Even discounting Wednesday’s jump, Bitcoin has gained about 75% over the last two weeks, and the price has quadrupled since the crypto winter in January. 

$14,000 isn’t far off from $20,000! Well, aside from a $6,000 difference, Bitcoin’s price is coming ever closer to the all-time 2017 peak, and all signs point to continuing growth this week’s correction notwithstanding. In fact, June was the cryptocurrency’s fifth straight month of positive returns, the longest streak since 2017, which some analysts have taken as a sign of retail investor confidence returning.
So what caused the spike, anyway?  At least one reason is being laid , at the feet of Tether, the US dollar-pegged stablecoin underlying a lot of exchange liquidity. But not everyone agrees - competing theories include hype surrounding Facebook’s Libra and growing retail demand. Whatever the true cause of the spike, the hype is returning to the Bitcoin space, and investors, both retail and institutional, are taking notice.
What about the alts? Litecoin has been an almost consistent overperformer this year, but the biggest altcoins, including Ethereum and Ripple, experienced the same correction as Bitcoin, losing 5-10% over the previous day. And, unlike previous BTC rallies, the alts aren’t going to share in that success, according to veteran trader Peter Brandt, who paints the situation of altcoins as analogous to the early 2000’s dot com boom.
Wut We Think: Altcoin doom or not, Bitcoin’s fundamentals, including the number of Bitcoin active wallets, Bitcoin daily transactions, and Bitcoin network’s hash rate, just keep rising. In particular, the hash rate has reached 69 quintillion hashes per second, an all-time high. This has led to a buying spree of purpose-built miners and has even boosted chip-maker AMD’s stock, who made a heavy bet on mining back in November. All of this attention and energy isn’t going to just dissipate - be on the lookout for an inevitable correction, possibly below $10,000, before the price consolidates and starts swinging back up.

Apple’s 2% Stock Dip Due to Ive’s Departure

Apple isn’t the company you grew up with...and with star designer’s Jony Ive’s announced departure  from the company, it’s another sign that Steve Jobs isn’t in charge anymore. While the news initially led to a 2% dip in the venerable tech giant’s stock price, the price quickly reversed when trading opened on Monday and is currently sitting 2% higher than the same time last week. But stock price fluctuations aside, Jony Ive is responsible for some of the biggest design changes in modern personal computing, and it’s hard to overstate his influence.
Who is Ive, anyway? Jony Ive has been with the company for 30 years and has been responsible for some of Apple’s boldest designs, including the iPhone, the original Macbook and a whole slew of iDevices. His work has earned Ive a knighthood in the UK and has defined the look for modern technology for millions of users. But cracks started to show after Steve Job’s death and the Apple Watch launch disaster. While Ive’s promotion to Chief Design Officer was meant to showcase his value to Apple, it actually shifted a lot of his day-to-day responsibilities to others. He’s not leaving Apple entirely, however - his new design company will still keep Apple as a client.
What does this mean for Apple? It honestly may not matter that much. Ive has been hands-off for the past few years, and recent stories about friction between the company’s CEO, Tim Cook, and Ive have been called overblown. While Ive’s designs may have been revolutionary in the 90s and aughts, enough copycats have appeared that Apple’s traditional design philosophy is now mainstream and common. 
And markets don’t seem that concerned: Despite a small dip in price when the news came out over the weekend, regular trading is showing small but steady growth for Apple. Investors are more worried about the continuing trade war with China than Ive’s departure, though a recent abatement of tensions at the G20 caused the price to rally this week. On the earnings side, quarterly revenue performance has still been weak, with a 5% decline year-over-year at $58 billion, and Q3 earnings at the end of this month are not expected to reverse that decline. 
Wut We Think: Ive’s resignation and the launch of his own design company, LoveFrom, is not expected to affect Apple’s market value. Apple hasn’t had any Ive-driven product launch since the Apple Watch, and this may free Apple to take a more revolutionary path forward. Apple has bigger concerns, anyway - despite the threat of sanctions being off the table, Chinese consumers are still boycotting Apple products, and there’s no guarantee that the trade war won’t flare up again. The company’s Q3 earnings on July 30th will shed more light, but it doesn’t seem like an entirely bright future for Apple.

A G20 Success Story - The Trade War Is On Cease-fire

Markets around the world are celebrating as sanctions are delayed...due to US President Donald Trump’s decision not to levy tariffs on $300 billion worth of goods from China. The news gave the Dow and S&P 500 a 1% bump when trading opened on Monday, sparking relief amongst beleaguered tech companies who rely on China for business.

So it’s finally over? Not by a long shot. While Trump said that the talks between him and his Chinese counterpart, Xi Jinping, were productive, all this signals is that the tariffs are off the table (for now, at least), and that the previously canceled trade talks are back on track. Merril Lynch analysts have called the latest truce the ‘eye of the storm’, and predict that the US-China trade war will remain the top financial story for at least the rest of the year.  

And markets expect the same: Despite the spike on Monday, markets have cooled down since then, and investors all over the world are cutting growth forecasts and building up war chests. Asian markets closed in the red on Wednesday, with the Japanese Nikkei down 0.5% and Hong Kong’s Hang Seng Index down 0.3%. Central bankers across the world, including the United States Federal Reserve, are expected to cut rates, with Australia and India already having done so.  

So what do we have to look forward to? How about a new trade war with Europe instead? With tensions simmering down with China, Trump has threatened new tariffs on Europe, after accusing the EU of unfair practices related to subsidies to airplane construction company Airbus. Even if the alleged $4 billion in tariffs aren’t applied, analysts are still warning that the US markets could see as much as a 10 percent correction over the summer, and if the renewed talks don’t go well, a much steeper dive.

Wut We Think: The trade war isn’t going anywhere, and in fact may just be opening up a new front. While a lot of Trump’s tariff threats have historically been bluster (or negotiation tactics), the markets have experienced a bumpy ride, with Merrill Lynch’s head of US equity writing that the S&P could be at least 5% higher if it wasn’t for the trade war. And while Huawei is off the US chopping block, markets are currently at the mercy of trade agreements that can still end up going pear-shaped. The risk to global supply chains is still there, and despite the ceasefire, nothing permanent has changed.
 
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