Market Commentary von Patrick Heusser, Crypto Finance AG
Good Morning!
Good Morning!
The pressure is mounting.
In almost every country, voices are getting louder, demanding that the economy reopen. Not only adults want to go back to work, kids miss their friends and they even miss school.
How does this affect the global financial market and crypto assets?
The way equities are trading (or opening this morning) it seems that investors around the globe are flirting with a reopening of the economy. Additionally, we have every central bank on the planet providing a backstop for pretty much every fixed income product out there.
Crypto assets, and in particular bitcoin, seem to have moved inline with risk-on assets such as equities. Therefore, it is not surprising that we have seen a slow but steady increase in the value of those assets. Looking at the total market cap of crypto assets, we are now back to the level before the 12/13 March sell-off at around $220 billion.
The COVID-19 crisis has opened old wounds
My issue is this: I feel uneasy with this positive market sentiment. In my opinion, the structural problems are still there. For example, the never ending shortage of US dollar liquidity; or the corporate bond sector, which has been continuously "overheating" for the last few years (with no real correction). Looking at Europe, the COVID-19 crisis has opened up old wounds, and we are seeing the peripheral bond spreads widening (bringing back memories of the 2011 European Government crisis). And not to forget the looming collapse of commercial property.
I know, most of these issues are not imminent threats, but they are ticking time bombs. And they are the cause for my uneasy feeling about the current state of the market.
Positive development regarding CBDCs should be highlighted
I would like to mention one positive development that has come out of all this: CBDC. I know that many people who are hard-core into crypto see this as another incision into their privacy. It definitely is, but I reckon that without CBDCs the global central banks will not be able to control monetary policy efficiently enough. We are already seeing today that negative interest rates are not "feeding down" into the real economy. Instead, they are using their balance sheet to tackle the decreasing efficiency of their interest rate policy.
Maybe the era of setting monetary policy through interest rates is coming to an end...
It is anyone's guess, but I truly believe that bitcoin has a shot at becoming a global independent store of value.
