(BTC) Consolidated Sunday’s Rally yet Remains Under Pressure

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A bearish bias is expected to play a major role in the ongoing bullion movement on Monday, January 11. The U.S.-based metals group OTC Markets Inc. gave out a consensus estimate of +10% for Wednesday’s market session and expects this week’s ‘weekly gold’s, copper & platinum ‘gold’, silver & palladium are all heading towards multi-month highs.

The upcoming Friday and Saturday will see a lot of investors’ attention as it may be one of the most important market sessions in the last several weeks of 2021.

A significant number of analysts believe that a positive rebound in equities can be expected during Friday’s trading session – that is why the bullish momentum throughout the weekend remains in consideration. It seems like the US Federal Reserve’s announcement of $800 billion stimulus program may give some support to stocks to push forward with their recovery, even if it’s only a temporary reprieve so far. Many analysts expect the market to continue to rise during the day, pushing up by 5%-7%, possibly even going after the upper 7%. On top of that, the incoming Biden administration might also have an impact on markets, as he pledged to pursue his agenda from Washington DC – a promise that could drive the United States into the next round. That said, analysts may still think twice before committing too much money to such an event. In any case, a couple of reasons for caution should be on traders’ minds. Firstly, there’s no guarantee that those funds can make a difference, and there’s always a chance of its reversal back. Secondly, we shouldn’t be surprised to hear more talks about a trade war with China. However, the real winner will be those big corporations who will receive bigger tax cuts. To keep this in mind, let’s take a look at what can happen in the near-term.

1. Stocks will decline a bit in February if President Joe Biden doesn’t get enough votes

It seems obvious that Republicans won’t be happy if Democrats control both houses of Congress in order to pass Biden’s agenda. As such, analysts and political pundits are expecting some downside correction on Friday and Saturday, primarily due to Biden’s razor-thin majority. Some of the biggest names will likely drop by 5-6% on Friday, especially banks and other financial institutions who have been riding high on optimism over the election outcome. This could trigger some moderate selling in the afternoon of Monday, Jan. 11. Another reason for concern is that Biden has already promised to expand the current $3 trillion debt ceiling, which means that the government will need to do more borrowing. An overall negative reaction towards Biden could trigger another sell down – another round of the S&P 500 would also drop at least 0.2%. After all, stocks are cyclical after all, but this could turn into a complete turnaround.

2. Global currencies will weaken

The dollar was strong in December and early January this year, thanks to an unprecedented stimulus program by Treasury Secretary Janet Yellen. At the time many were thinking that there would be no risk of Trump withdrawing from the global trade pact known as NAFTA. Since then there had already been hints of a potential hardline stance against China who saw China taking advantage of the pandemic for the benefit of domestic industries. With this, many economists have given credit to China for taking advantage of the situation rather than following international norms. Chinese president Xi Jinping has also warned that if the West keeps pushing economic sanctions against Beijing, they could face retaliatory measures in response. These words put Biden’s chances at best looking weak and at worst looking very shaky. If the EU and Britain follow through with their threat of tariffs, they would cause a wave of tensions between Europe and the UK, both of whom are struggling to revive their economies without doing anything drastic. Therefore, with the possibility that new world powers are on the way, it’s not going to be safe to buy American Treasuries or long-term treasury bills right now. We have seen how fast the dollar goes down, so it seems better with investors to sit on your cash instead of investing in bonds right now. When you have a tight budget, you probably don’t want to invest in unneeded bond yields. You need to be able to rely on income while paying off loans. So, by losing confidence in the USD, investors should look to alternative currencies and commodities, including bitcoin which is considered a digital form of currency. Although it is currently falling below its record peak, BTC has a lot of room left to grow, considering the rising level of uncertainty towards these countries and the growing influence of Elon Musk’s Tesla and SpaceX company over the auto industry. Should the price of BTC fall back below 300,000, we could see a short squeeze in crypto. That would mean everyone who owns one would either lose their coin or have to wait for someone else to buy theirs – which may be extremely painful. What’s most important is to buy low – because once the coin drops again, the rally will resume and the value of a single Bitcoin would plummet again. By looking at the factors behind the current slump, they can give investors a good hint on where the end-game really lies.

3. Oil prices are bound to drop. Not just because oil is used to pump gas across cities. We all know the reality today where oil does no longer provide energy to electric vehicles, but now the supply chain for consumer goods seems to be getting stretched due to cheaper crude. Also, there’s now no shortage of people willing to work in developing nations, but they aren’t being paid well enough. Even though the coronavirus crisis triggered mass layoffs, we must realise that things are likely to get worse before things get better. Thus, oil companies are expecting the U.S. oil market to recover during the fourth quarter, although it’s unlikely that the industry will return to pre-pandemic levels. Also, OPEC+ may decide to boost output by 250 mmboe/d during July and August, although it’s likely that they’ll cut it to around 1,500 mmboe/d by August. However, if the price of oil gets lower, the profit margins of BP, Chevron, Exxon and others could go down drastically. For instance, Exxon Mobil is planning to start producing its own fuel for trucks after spending an average of $4 million every month to hire workers. But, it’s a challenge. And given the existing supply chain issues, Exxon hopes to reach net zero emissions by 2050. Unfortunately for them, this is coming later than many expected. No matter how clean some fuels they may try using in a bid to reduce carbon footprints, the fact is they won’t be ready to make a change immediately. Moreover, the cost savings and reduced demand will add up to larger profits in the latter half of 2020. That doesn’t look too appealing for consumers. Nevertheless, despite this trend, it looks like energy firms are optimistic as oil has shown significant resilience since the 2008 crash. Whether this will help oil companies recover is something we can discuss further after this data, but for now the outlook is looking pretty grim.

4. Money managers are also becoming cautious

As previously mentioned, the U.S. Fed is preparing a massive stimulus package of $400 billion for the economy. Investors are counting on that to come to fruition as soon as possible, but they should be careful of expectations. Yes, it seems like a huge move, but it’s not the first time it happened. There was also the dot com bubble in 2000, but that went nowhere. Besides, people have become quite cynical about the future of technology, as people are aware of the inevitable downfall towards artificial intelligence. We’re facing another technological revolution, this time it is led by AI. One of the trends for 2018 will be increased regulation on algorithmic trading, as the White House wants to crack down on algorithmic trader models that predict stock performance. As the regulations kick in, Wall Street and hedge funds will face scrutiny regarding the adequacy of their model portfolios in making investment decisions. This makes a direct correlation between the SEC’s recent decision and the impending collapse of money managers, whose asset allocations have significantly shifted away from index investments.

What really matters here is whether this latest development of regulation will help us avoid the same downfall in 20 years from now that happened in 2000. I believe the answer to that question is yes. Once again, the focus should be solely on algorithms in forecasting stock performance when this happens. Only a few people will be making the necessary financial decisions during the COVID-19 pandemics. They can afford to hold money in small-cap securities and exchange cash instead. Given the current state of affairs, a change in mindset towards finance might be worth having. Especially during such challenging times, it might be wise to consider switching jobs and becoming a personal loan broker. Having cash on hand at home would bring peace of mind. Also, it will allow me to be financially independent in the days when travel resumes.

The bottom line is that we are faced with two conflicting events: a potential recession and a potential growth recovery. Although it’s hard to predict what will happen given the ongoing unknowns right now, in terms of market performance, the market is expected to stay firm and stable until some sort of news or updates surface. Just remember, this isn’t a race, nor is it like the 2008 crash.

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