Summary: Bitcoin (BTCUSD) hits a five-month high of 57,000 amid several positive news the past week while Ethereum has experienced a more modest surge. Ethereum has also hit a milestone as over 500,000 Ether has been burned since the highly anticipated update was implemented in early August.
Throughout the last week, the largest cryptocurrency measured on market capitalization Bitcoin (BTCUSD) has been riding on top of positive market sentiment to exceed 50,000 once again. At present, it however seems like aged news since Bitcoin is currently trading at around 56,300 from being traded as high as 57,000 earlier today which we have not observed since mid-May. Bitcoin is yet far from its all-time high of around 64,500, which was set in April this year.
The second-largest cryptocurrency Ethereum (ETCUSD) has been following in the footsteps of Bitcoin, though more modest, to currently being traded around 3,600, up from 3,400 last week. Several other altcoins have seen similar modest price increases like Ethereum. In the past months, Ethereum and other altcoins have gained the most attention effectively reducing Bitcoin’s market capitalization dominance to as low as 41%. With the past week’s surge, Bitcoin’s dominance is currently up to around 45%. This can potentially indicate a renewed focus on Bitcoin in comparison to the rest of the crypto market.
The positive market sentiment the past week has been driven by various positive news. First, Bank of America published a report on the crypto market last week. The report mentioned that Bitcoin at 50,000 is “too large to ignore”. To top it off, the report was extraordinarily positive on decentralized finance and non-fungible tokens (NFTs). Second, the family office of famous hedge fund manager George Soros, Soros Fund Management, confirmed last week that they own Bitcoins: “some coins … but not a lot”. Lastly, according to JPMorgan, the surge has partly been due to institutional investors hedging against inflation with Bitcoin, even favoring Bitcoin to gold, which explains gold’s trouble to gain momentum despite accelerating inflation expectations due to a new all-time high in commodities. However, on Monday last week, JPMorgan’s CEO Jamie Dimon said he remains a skeptic of Bitcoin.
500,000 Ether has been burned
On 5 August 2021, Ethereum’s London update was implemented on the network, containing several improvements. The most anticipated improvement was EIP-1559. In short, EIP-1559 burns the majority of Ether paid in transaction fees instead of compensating them to miners, as the network did previously. Subsequently, this means the inflation has been immensely reduced. The network burns Ether according to the network usage due to it resulting in greater transaction fees, thus more to be burned. The burning mechanism hit somewhat of a milestone today as it has burned over 500,000 ETH to date, worth approximately $1.68bn. About a week after the update was implemented, we estimated between 1.6 – 1.7mn Ether would be burned next year. Though, having burned over 500,000 ETH in 66 days, it appears that the number will likely be closer to around 3mn ETH. This serves as beneficial for Ethereum investors since it further reduces the inflation by at least 1.3mn ETH compared to our initial estimate, in case the network manages to burn 3mn ETH the next year.
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist
Disclaimer
The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)
