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Precious Metals

Big Banks Believe Bitcoin May Very Well Become the New Gold

Bitcoin (CCC:BTC-USD) has been a well-known entry point into the world of cryptocurrency and defi. 
Source: Vladimir Kazakov / Shutterstock.com
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Bitcoin (CCC:BTC-USD) has been a well-known entry point into the world of cryptocurrency and defi. 

A concept image with the logo for Wrapped Bitcoin.Source: Vladimir Kazakov / Shutterstock.com

Its ascent, along with that of Ethereum (CCC:ETH-USD), paved the way for a wave of cryptocurrencies. In a sense, those two pioneers took a back seat of late while smaller projects received loads of attention. 

First adopters were keen on Bitcoin long ago. They’ve since become interested in smaller projects for the most part. 

But now, something interesting is happening that relates to Bitcoin. More traditional investors, including those who count on finance houses, like JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C), are moving into Bitcoin. 

Lagging Demand 

You could be forgiven for believing that Bitcoin’s best days were behind it over the past few months. After all, it had hovered in the $40k range for quite some time. It seemed like that might be its new ceiling moving forward. 

But thanks to slower adopters there is something very interesting happening with Bitcoin. The narrative of Bitcoin as a hedge against inflation is reemerging. 

JPMorgan Chase analyst Nikolaos Panigirtzoglou noted that Bitcoin is drawing institutional investor demand as a hedge against inflation in an Oct. 6 note to the bank’s clients. 

If you remember back to late 2020 and early 2021 Bitcoin also drew significant interest as a hedge against inflation back then. 

BTC and the Gold Hedge

A clue as to the renewed interest in Bitcoin can be found in the year-to-date prices of gold. Gold has decreased in price by 6.5% in 2021. Investors expect that gold should rise in this environment as inflation concerns are mounting, but that doesn’t seem to be the case. Weak gold demand has caused prices to fall below $1,800. 

So, given that gold isn’t fulfilling its role as a traditional buffer against inflation, institutional investors have looked to Bitcoin in recent weeks.

As a consequence, Bitcoin prices have increased 30.81% since Sept. 29, rising from $45.5k to above $54k. Meanwhile, gold prices are down a few percentage points over the last month. Citigroup has also noted an uptick in interest regarding Bitcoin and crypto recently as well. 

Itay Tuchman is the global head of foreign exchange at CitiBank. He recently spoke about the intersection of cryptocurrency and ‘tradfi’, aka traditional finance, at the Token 2049 conference in London. 

He stated that institutional investors who began learning about defi starting with Bitcoin, became immediately interested in wider implications.

“It was almost instantaneously a narrative about investing in crypto ecology, and decentralized networks and different kinds of financial architecture in the future,” Tuchman said. “[It] became a technology—an innovation-investment conversation—in a matter of seconds.”

Does that mean that Citigroup will soon break the mold and become the first bank with its own crypto custodian? 

Tuchman seemed to imply that the chances are rising when he noted that his bank would have to do a considerable amount of hand-holding.

“In order for us to add value to our customer base, we have to add value in an environment that has the standards that we would expect from safety and soundness,” he said.

Takeaway

It is clear that Bitcoin is on the rise. Part of that has to do with its role as a hedge against inflation. The fact that investors are turning to it as gold falters in that role is extremely interesting in and of itself. 

It seems to vindicate prior notions of Bitcoin as gold. 

Equally as interesting is who is behind the shift. It’s institutional investors who are normally very conservative. They want a hedge against inflation. If Bitcoin can act as such a tool, then they’ll continue to raise demand for it. That is a sea change as well. 

If prices continue to rise and more traditional investors realize Bitcoin as the new gold, then don’t be surprised when it tests new highs in price.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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Precious Metals

Moscow Exchange extends the trading hours of Equity Market

Earlier this year, Moscow Exchange has been extending trading hours for market participants. Since March, MOEX’s FX, Precious Metals and…
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Earlier this year, Moscow Exchange has been extending trading hours for market participants. Since March, MOEX’s FX, Precious Metals and Derivatives Markets opened at 7am and closed at 23:50 Moscow time. The exchange made available after-hours trading on Bond Market in September.

Clients of the exchange are able to test the morning hours on their trading systems from 13 October.

In order to make pricing on FX Market more effective, Moscow Exchange will hold opening auction from 6:50am to 7:00am for all spot instruments from 6 December 2021. This aims to generate a more representative opening price and reduce the risk of artificially inflating or undervaluing the market price. The Equity & Bond Market has opening auctioning placed since 2015.

Last month, the Russian market maker expanded the direct market access to use OTC services on MOEX’s FX and Precious Metals Markets. The exchange launched Linking with Foreign Liquidity Providers using NTPro platform technology.

The post Moscow Exchange extends the trading hours of Equity Market appeared first on LeapRate.

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Precious Metals

Bitcoin to $500K

Jamie Dimon bashes bitcoin while profiting from bitcoin … the case for bitcoin at $500K … a potential price catalyst to keep on your radar … is gold…

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Jamie Dimon bashes bitcoin while profiting from bitcoin … the case for bitcoin at $500K … a potential price catalyst to keep on your radar … is gold about to turn north?

Jamie Dimon is the CEO of JPMorgan.

He’s also a master marketer.

Earlier this week, he called bitcoin “worthless.” It’s far from the first time he’s slammed the cryptocurrency. Here’s a quick trip down memory lane featuring some of Dimon’s greatest hits:

2014: “terrible store of value”
2015: “will not survive” “will be stopped”
2016: “going nowhere”
2017: “a fraud”
2018: “don’t really give a shit”
2020: “not my cup of tea”
2021: “I have no interest in it” “fool’s gold” “worthless”

The press has pounced on Dimon’s latest “worthless” attack.

I’m seeing it covered by CNBC, Reuters, CNN, MarketWatch, Fortune, Bloomberg, Yahoo… Basically, everyone – not to mention all the social media talking heads.

So, why is Dimon a marketing genius?

Because the same articles/talk segments that trumpet Dimon’s disparaging remarks just happen to include the fact that JPMorgan now allows its customers to buy and sell bitcoin.

In other words, Dimon just racked up hundreds of millions of dollars’ worth of free advertising for JPMorgan’s crypto services…by being a crypto bear.

Bravo, Sir.

***At the same time Dimon has been slamming bitcoin, its price has been surging, pushing back toward its all-time-high

In April, bitcoin topped out at $64,863, then lost 53% over the next three months.

Source: StockCharts.com

Since then, the crypto has surged 87%, putting its all-time-high back into play.

As I write Wednesday morning, Bitcoin is roughly 16% beneath its record. As you’re likely aware, that’s not a huge distance to cover for an asset this explosive.

***Given the crypto’s surging momentum, financial pundits are increasingly asking where bitcoin’s price will end the year

Many are suggesting $100,000.

You can count our crypto expert, Luke Lango, amongst that group. But yesterday, in Luke’s issue of Hypergrowth Investing, he included a longer-term forecast that caught me off-guard…

$500,000.

From Luke:

A lot of folks think that Bitcoin is going to end the year at $100,000.

I’m one of those folks. But the other day, when one of my analysts said, “Bitcoin is going to $100K,” I responded by sarcastically joking, “Stop being so bearish!

Because while our year-end price target for Bitcoin is $100,000, we believe that Bitcoin prices will soar much, much higher in the long run.

Like 5X higher.

That’s right. We think Bitcoin is going to $500,000.

What’s the rationale behind this projection?

It has to do with a yellow rock that we recently profiled here in the Digest.

***Has bitcoin usurped gold as an inflation hedge? At least temporarily?

As we noted in our Monday Digest, gold’s price has been comatose over the last 14 months, despite jarring inflation numbers.

(It’s actually climbing today! We’ll touch on that shortly.)

But isn’t gold supposed to come alive in an inflationary environment?

Yes, it’s supposed to. But many things are “supposed” to happen that never do (I’m looking at you, “transitory” inflation).

Why isn’t gold responding to record inflation numbers?

It was back in April that our macro specialist, Eric Fry, provided a clue. From an interview Eric did with our CEO, Brian Hunt:

If you were to take past precedent and apply that to the current situation, you would have a current gold price that’s $4,000 an ounce, or at least something much higher than it is. That isn’t happening.

What is happening is bitcoin is going up…a lot…

Once that settles down, you might see a return to a more-traditional connection between monetary policy, fiscal policy, and the gold price…

I think gold still has a good shot at moving a lot higher over the next year or two. But if current trends continue, and bitcoin goes to $100,000 or $200,000, you probably won’t get a gold rally.

As part of the interview, Brian added a great line. He wondered if gold has been watching market prices, wondering “have investors broken up with me?” Is bitcoin the better-looking version of me?”

Is it?

What’s the case for bitcoin usurping gold as the new, younger and sexier inflation-hedge?

***Charting the relationship between yields, bitcoin, and gold

Let’s jump back to Luke. In his case for bitcoin at $500,000, he included the chart below.

I’ll let him describe it:

The blue line tracks Bitcoin prices.

The purple line tracks the 10-year Treasury yield, which is widely seen as the market’s dynamic proxy for inflation.

And the green line tracks the price of gold.

Chart showing the relationship between yields, bitcoin, and goldSource: TradingView

The blue and purple lines correlate strongly to one another. The green line doesn’t correlate to either.

That’s super interesting.

To us, it means that the market has already confirmed Bitcoin as the digital version of gold – and, indeed, as a superior version of gold.

Let’s use this to dovetail into the case for bitcoin at $500,000.

If bitcoin is turning into the new gold, then we basically just compare overall market sizes to arrive at a loose price projection.

Back to Luke for the quick math:

The gold market is an $11 trillion market.

If Bitcoin gets that big, you’re talking an $11 trillion market on 21 million tokens, which implies a price per token of about $500,000.

Of course, that back-of-the-envelope math rests on the huge assumption that Bitcoin is, indeed, the digital version of gold.

But as Luke’s chart illustrates, it’s increasingly looking like that may already be the case.

***One quick bullish note on gold before we move on

We’ve beaten up on the precious metal this week. But there’s one thing gold has going for it that might spur a rally. And we could be seeing the beginning of that rally today, as gold is up nearly 2%.

In short, the pessimism has reached an extreme – and by one indicator, it’s turning.

Below, we look at the Gold Miners Bullish Percent Index (BPGDM). This measures the extent to which gold miners (a proxy for gold) might be overbought or oversold, based on technical analysis.

As you can see below, it just bounced off the fourth-lowest reading in five years (far right side of the chart).

The Gold Miners Bullish Percent IndexSource: StockCharts.com

The last three times BPGDM bounced from such deep, oversold levels, the price of gold ripped, as you can see below.

The top line is the BPGDM while the bottom line is the price of gold.

The Gold Miners Bullish Percent Index and the price of goldSource: StockCharts.com

Even if bitcoin is replacing gold as an inflation hedge, that doesn’t mean gold can’t race higher from here.

For now, we’re long gold. Its long-term support level is $1,700. We’re above that and climbing. So, let’s give this turn in the BPGDM some time to play out.

If a rally doesn’t materialize and we drift back down toward $1,700, we’ll let you know.

***Back to bitcoin, keep your eye on this potential catalyst

The crypto community has been waiting for the SEC to approve – or not approve – a bitcoin ETF. And we’re getting close.

From Yahoo! Finance:

The U.S. Securities and Exchange Commission (SEC) is largely expected to approve a bitcoin ETF that invests in futures contracts later this month.

Applications from Proshares, Invesco, Vaneck and Valkyrie are primed to get the go ahead, according to a Bloomberg report.

The crypto market has long-awaited such an approval, believed to be behind bitcoin’s current bullish run.

Now, there’s no guarantee that SEC approval will send bitcoin’s price north. After all, many investors were expecting El Salvador’s official launch of bitcoin as legal currency to be a positive price catalyst for bitcoin, yet the opposite happened.

However, the bullish case is that an SEC approval would signal that regulators are willing to work with crypto investors, therein paving the way for broader adoption.

From Bloomberg:

It’s all raising hopes in the $6.7 trillion U.S. ETF industry and beyond that after years of delays, the world’s largest market may finally be ready to join the party…

In a move that further raised hopes among crypto advocates, the regulator asked two issuers to withdraw their Ethereum-futures ETF filings over the U.S. summer, but made no such demands on similar Bitcoin-based applications.

Either way, we’re unequivocally long bitcoin. If an SEC ETF approval does lead to a sell-off, we’d see that as a buying opportunity.

Before we wrap up, when might we hit that $500,000 mark if bitcoin plays out as Luke anticipates?

From Luke:

No one really knows. Our best guess is about 10 years – and if so, you’re talking about an asset that will increase 10X in value in 10 years.

That’s an amazing return.

It truly is.

At the same time, Luke and his team of blockchain experts are targeting not 10X returns, but 50X returns with their altcoin recommendations. To learn more, click here.

We’ll keep you up to speed on the SEC and its decision on a bitcoin ETF here in the Digest.

Have a good evening,

Jeff Remsburg

The post Bitcoin to $500K appeared first on InvestorPlace.

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Economics

What is Stagflation and How Will It Affect the Global Recovery?

According to the National Bank of Canada the risk of global stagflation is surfacing due to rising oil prices, soaring food costs, and slow economic growth…

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According to…[the] National Bank of Canada…the risk of global stagflation is surfacing due to rising oil prices, soaring food costs, and slow economic growth…[which] threatens to undermine the global recovery. 

What is Stagflation?

Stagflation is high inflation during a recession, when it typically shouldn’t be seen.

  • In a healthy scenario, inflation is the result of rising productivity and a tight job market. It’s viewed as a side effect of too much success.
  • During stagflation, inflation rises with high unemployment and slow growth. It’s often the result of lower confidence in a currency. Rising inflation for essential goods means diverting spending from other areas of spending. Diverted cash diverts revenues for certain companies, which can further slow growth.

Early Signs Of Stagflation Have Begun To Appear

One of the most well-known periods of global stagflation was the early 1970s. Oil trade restrictions resulted in rising energy costs, which trickled into most goods. This made already elevated inflation even worse, especially for food. Since this was during a recession, it exacerbated the difficulty of unemployment…

The National Bank sees some signs of stagflation beginning to appear in the economy. Like in the 1970s, it’s starting with a shock to energy prices due to a shortage, and rising carbon permit costs in OECD countries and this can slow global trade. in addition, the pandemic recession is still raging on, with elevated unemployment…

Rising Global Food Prices May Slow Global Economic Growth

Global food prices are rising at an unusually fast rate these days, and it’s not a base effect. The United Nations Food Price Index shows the basket price of food is up 30% year to date, from it’s 2020 average…[which is] the highest level of growth since the 1970s…

…Food is one of the largest components of household expenses in emerging economies (about 60% of global GDP)…[and,] as food prices rise, capital will be diverted into essentials… killing emerging market consumption…[which] will drag global trade. “Clouds are forming over global economic growth forecasts for 2022,” concludes the National Bank of Canada.
Editor’s Note:  The original post by Daniel Wong has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read.  The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.  Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.

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