Covid-19 Continues to Take a Toll on the U.S. Economy

The action of the markets continues to confound financial professionals. The economy in the United States is in the worse shape it has been in since the early years of the 20^th century, and stock prices are soaring. The government continues on a borrowing spree. The amount of borrowing may hit an all-time record of $4.5 trillion this fiscal year, and yet, yields on 10-year bonds are at historic lows.

Jobless Numbers Drop

Last Thursday’s reported jobless claims fell to 963,000. The first time since March, the numbers fell below 1 million. In the confusing world of Wall Street, the improvement is not taken as positive. It is neutral, at best. It is felt by analysts, that a decrease in jobless numbers might relieve pressure on the government to fast-track more multi-billion-dollar stimulus packages. Chris Gaffney, World Markets President at TIAA Bank, suggested in a comment he made during an interview with Bloomberg News, “The good news may actually be bad news.”

Athanasios Vamvakidis, analysis for the Bank of America, last week said in a report that it is difficult to tell if the recent slide of the dollar on global currency markets is the result of the current policies of the Fed. Or worse, it might be fear that the dollar is losing its long-held status of being the leading world currency.

With all the turmoil in traditional markets, traders in crypto have remained bullish. So far, in 2020, Bitcoin is up 64 percent, doubling the record-breaking gains in gold. Thanks to DeFi, decentralized finance, the Ethereum native token has tripled in the same period.

Risk-on Hedging Asset

On Thursday, the head of research at Stack Funds, Lennard Neo, said that Bitcoin might perform well in any current market scenario. He suggests Bitcoin “Could be a risk-on hedging asset,” one that performs well when markets are thriving, and acts as a hedge during global uncertainties. He went on to say that Bitcoin appears to display financial attributes that fall between gold and equity.

Cryptocurrency mentions are becoming quite common in the mainstream financial press. On Thursday, the Financial Times noted that cryptocurrency hedge-fund managers had returned far more when compared to hedge-funds generated across traditional assets. Crypto has returned more than 50 percent, whereas regular asset class gains are, at best, in the low single-digits.

After meeting with Cameron and Tyler Winklevoss, the founders of Gemini cryptocurrency exchange, Dave Portnoy, president of Barstool Sports, reportedly now owns a million dollars in Bitcoin. The market has become so bizarre that some analysts are the first to admit even they can’t make head nor tails of the market movements.

Perhaps the safest interpretation of what’s going on came from Mati Greenspan, founder of Quantum Economics. On Thursday, he told the subscribers to his newsletter that any investment at this time needs to be approached with caution.

Despite risk aversion in traditional markets, Bitcoin gained on Thursday, the second straight day of gains. The current consolidation could result in Bitcoin prices breaking out above $12,000. Ether, the second-largest crypto, has confirmed a bull flag breakout by jumping to new highs. This might be a positive sign for Bitcoin.

There has been a recent surge in institutional participation in Bitcoin. Earlier last week, futures listed on the CME (Chicago Mercantile Exchange) rose to a record high of $841 million. Bitcoin on the CME is up over 100 percent during the last month, according to data source Skew.