Global market analysis

Daily-earnings of 7.03% or 7.73%! Are we describing a normal day on the cryptos market? This is not the case my friends, these are simply the results recorded this Monday for the SP500 and the Dow Jones respectively.

Bitcoin was up 8.52% on the same day, just a little more than two of the world’s largest stock indices, but nothing compared to the 20.11% rise in Ethereum.

Macro figures that are improving?

One could argue that this is due to an improvement in US macroeconomic conditions. Indeed, more than conventional measures have been adopted in order to curb the crisis linked to the spread of COVID 19.

Unfortunately, this is not at all the case, and this was already being felt in February, when retail sales figures for that month were already negative with a drop of -0.5%, while January saw an increase of 0.6%.

The NFP, one of the key indicators of the U.S. economic situation, is very strongly negative at -701,000 against -100,000 expected. Unemployment is logically up for March with 4.4% compared to 3.5% in February.

The reason behind this increase is therefore not to be found in the macroeconomic indicators.

Is Covid-19 slowing down?

The recent figures concerning the spread of COVID-19 are more encouraging these last few days with only 50 new cases in South Korea and 0 new deaths in China from Sunday to Monday. New cases in the US, although still extremely high, have been lower in the last two days while new admissions seem to have reached a plateau in Europe.

This is not a plea for a relaxation of measures, on the contrary! Nevertheless, we can begin to feel the effects of this global social distancing.

Donald Trump’s statements on Twitter regarding the possibility of direct payment to US households and the measures to support the economy have reassured the markets, which have rebounded, despite the fact that the real market situation is still under pressure, with more than half of the world still under containment.

Interesting technical level!

As we can see on the graph above, during the crashes of 2010 and 2011, the SP500 more or less bounced off the 23.6% Fibonacci before resuming its basic uptrend.

We can see that the SP500 also rebounded in the 23.6% Fibonacci area during the recent Covid19 crash. A potential bottom may have been reached on the SP500, nothing for sure of course, we are traders and not fortune tellers.

Speculation as a vector for growth

It could then be that the increase is only based on the future sentiment of market participants, you might say? Indeed, the perception in the presence of what the future value of an asset will be is the very basis of finance.

Traditional markets are no different from cryptos and are governed by the same emotions of overconfidence or extreme fear, for the simple reason that they reflect our human nature.

This sense of security may have been fuelled by Donald Trump’s announcements of hope. Indeed, while governments around the world will support the economy as best they can, this crisis will leave its mark on the economy for a long time to come, a reality that is not included in the current valuation.

Better to stay on the cryptos then?

We are at a time when the traditional market is becoming as speculative as the cryptos market. Except that cryptos are relatively untouched by the COVID insofar as containment does not prevent a blockchain from working, or people from using it. At this level, cryptos clearly have an advantage over the traditional market which is very strongly linked to the situation we are experiencing.

And this situation could very well be a positive element for the future of cryptos. Because when the solutions that have always worked don’t work anymore, we have to find new ones.

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