Bitcoin was lower after surging nearly $600 on Thursday to climb above $16,000 for the first time in almost three years.
"Investors should plan for volatility as well as price appreciation," the blockchain analysis firm Chainalysis wrote in a newsletter.
In traditional markets, European shares fluctuated and U.S. stock futures pointed toward a higher open as investors weighed prospects for a new stimulus package against record coronavirus cases. Gold strengthened 0.1% to $1,879 an ounce.
Federal Reserve Chair Jerome Powell has been sticking with his talking points lately. It goes something like this:
- What the economy needs right now is for U.S. lawmakers to pass a fiscal stimulus package because ostensibly that money can go directly to people and businesses that need it most. (Instead of having to pump it into financial markets where it has to filter through the banking system and money markets before it can get to pocketbooks.)
- The banks are stronger than they were in the 2008 financial crisis. (This ignores the question of whether they would still be strong if the Fed hadn't pumped $3 trillion into the financial system this year, a roughly 75% increase in the total amount of money created since the early 20th century, while the U.S. government plied businesses and households with another $2 trillion of emergency aid. Plus the fact that Fed officials have promised to do whatever it takes to keep markets functioning and the economy recovering, encouraging households and businesses to flood banks with deposits despite historically low interest rates.)
- U.S. authorities shouldn't hasten to rush out a digital dollar, because it's important to go slowly and carefully to preserve the greenback's status as the global reserve currency. (Even though China's central bank is already in trials with a digital currency and European Central Bank President Christine Lagarde says she might be eager to get the process started because it will take two to four years until launch.)
But what was perhaps more interesting and new among Powell's comments at a virtual forum Thursday hosted by the ECB was his acknowledgement that life as we know it – and by extension the economy – is probably never going back to anything like it once was.
"You'll see more telework," Powell said at the virtual forum. "We're not going back to the same economy. We're recovering to a different economy."
It was more than just a talking point. It might have offered a glimpse into a key issue that Powell hasn't said much about. The coronavirus will have a lasting and scarring impact on the economy, but remote working might be another massive factor to consider for monetary policy.
The economy is in upheaval, and not just because people aren't eating out or going to movies or traveling for leisure, or because so many businesses and households would be ailing right now without all the emergency aid.
A secular transition to commuting-by-Internet might be taking place, perhaps one of the biggest labor force transformations since the industrial revolution, which lured people to cities.
If workers genuinely enjoy the remote setup, and many do, and employers are genuinely seeing just how productive their employees can be working remotely, and it costs a lot of time and money to commute, and it's easier on many working parents to set up base at home, why would there ever be a return to the old office-based civilization?
What would this mean for the airlines? Commercial real estate? Oil companies? Automakers? Theme parks? Cities?
Governments and central banks are probably going to have to provide a lot of aid and stimulus to assure the transition goes smoothly, that society holds together, that people can manage. And that widespread debt defaults don't overwhelm the banking system. Even many people who think bankers take advantage of their enshrined role in the economy will acknowledge that banks play an essential role in the existing financial infrastructure.
Dave Hendler, principal and founder at the bank analysis firm Viola Risk Advisors, says one implication is that the hand of governments and central banks could be heavy in the economy for a long time.
He said in a phone interview he recently trekked from the New York suburbs into Manhattan for the first time since February for a wine-tasting event. While he was in town he visited his old barber. The barber, who has "one kid and another on the way," told Hendler he's down to one customer a day from a pre-pandemic level of about 20 a day.
Imagine if many of the office workers never really come back. It's an extreme but entirely plausible scenario.
"It's going to be a longer readjustment, and it's going to be more harsh," Hendler says. "There's going to have to be assistance for the transition to the new world."
Central bankers like Powell are only just now getting around to thinking about this, much less talking about it. As soon as more investors start to focus on it, the remote-working economy will probably demand a lot more attention – and possibly a lot more money.
- Bradley Keoun
Bitcoin appears to be holding above $16,000, and cryptocurrency traders are pondering the next move.
The big market debate now is if and when bitcoin returns to the record high price of around $20,000 reached in December 2017.
George McDonaugh, managing director and co-founder of the publicly traded cryptocurrency investment firm KR1, wrote Friday in emailed comments that he doesn't expect bitcoin holders to sell until prices reach a new record, "given the comparatively small delta between $16,000 and $20,000."
Bitcoin has been known to surprise in the past with pullbacks that punish overly bullish bets. Alternative.me's Crypto Fear & Greed Index has pushed into the "extreme greed" zone, from a reading of "neutral" just last month.
"I expect we don’t reach $20,000 in this current move," though it's likely to happen in 2021, McDonough wrote.
As noted last week by First Mover, bitcoin has spent so little time above $16,000 in its 11-year history that analysts eyeing price-chart patterns for clues have little to work with.
Matt Blom, head of sales and trading for the digital-asset financial firm Diginex, wrote Thursday that the next key level of price resistance looks to be at $17,130, with downside support at $15,420.
"New multi-year highs are fast becoming a dull headline," Blom wrote. "The bias to the market is still firmly bullish."
Bitcoin is now up an astounding 127% in 2020, versus 9.5% for the Standard & Poor's 500 Index of large U.S. stocks and 24% for gold.
Blockchain data show $300B of bitcoin moving to Binance from Huobi as the Chinese government cracks down on cryptocurrency exchanges (CoinDesk)
Chainalysis wants to help governmental clients sell millions of dollars in forfeited bitcoin (CoinDesk)
The latest on the economy and traditional finance
Former Chinese finance minister Lou Jiwei said Friday that U.S.-China trade tensions may not necessarily ease under a Biden administration (Reuters)
Brazilian President Bolsonaro handing out $10B a month to poor as public debt heads toward 100% of GDP from 76% last year (WSJ)
The deadline to divest U.S. operations for video-sharing app TikTok has come and gone, leaving the social media giant in limbo (Nikkei Asian Review)
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