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Markets Today – Ukraine, Yield Curve, Putin Blinks, SPR Release, OPEC+, Oil, Gold, Bitcoin

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Equities Drift Lower

By Craig Erlam, Senior Market Analyst, UK & EMEA, OANDA

Equity markets are a little lower on Thursday, as the broad consolidation continues against the backdrop of gradual progress on Ukraine, fluctuating energy prices and inverting yield curves.

There’s plenty out there at the moment to make us nervous but at the same time, glimmers of hope after a nightmare start to the year. Talks between Ukraine and Russia are moving at a snail’s pace and it’s worth taking positive steps with a pinch of salt, but the noises coming from Turkey are as promising as we’ve seen.

Yield curve talk is prominent once again as investors fret about the flashing recession warnings. The most widely watched 2-10 spread remains positive but is basically treading water at this point. It may not take much to tip it over the edge at which point, what will investors do?

I’m not sure they’ll be hugely deterred as lower growth is already priced in as central banks rush to get inflation under control and commodity prices spike. Ultimately it comes down to what kind of recession bond markets are potentially pricing in, what impact massive central bank balance sheets have on that and what the imminent shrinking of them will do.

Which brings us nicely to the commodity markets, where all of the action seems to be at the moment. And it would appear it is the Kremlin that blinked first after threatening to cut its “hostile” customers off if they refused to pay for gas in roubles, regardless of what the contracts stipulated.

After a week of consideration, it seems there’s been a certain amount of backtracking and/or modification to the demands which will allow Europe to purchase its gas in euros as it did before. That may change when contracts come up for renewal but for now, it removes any imminent threat and shows the G7 was correct to stand strong knowing the terms were in their favour.

Oil slides as IEA steps in amid OPEC+ inaction

Oil prices are falling heavily on the back of reports the US is poised to announce a substantial draw on the SPR. The withdrawal dwarfs previous moves by the administration, equating to one million barrels per day and 180 million overall, around a third of total reserves. If coordinated alongside other countries, it could be much larger again.

At a time of extreme tightness in the oil market, when Russian exports are being disrupted as a result of Western sanctions, the move is very welcome. And the timing is, I’m sure, no coincidence either coming in the months leading up to the midterms later this year as Biden seeks to protect his slim majorities in Congress. It may be too late for that though.

The move is arguably necessary as well, given the reluctance of the apparently apolitical OPEC+ to free up further supply to ease pressures in the market. The group is widely expected to stick to plans to only increase by 400,000 barrels per day in May, before no doubt missing those targets by a wide margin, leaving certain members perfectly able and entirely unwilling to fill the shortfall. And an IEA-led reserve release may only solidify their position, shortly after OPEC+ ditched the organisation as a data source in what I’m sure is another non-political move.

Gold consolidation continues

Gold prices are slipping a little but continue to trade around the middle of the range they’ve remained within for the last couple of weeks. The yellow metal has found strong support around $1,900, with $1,960 capping any upside late last week and early this. A relatively tight range by recent standards at a time of immense uncertainty, high inflation and very hawkish central banks. I can’t imagine support for gold is evaporating any time soon although the upside may be limited for now.

Bitcoin slightly pares gains ahead of resistance

Bitcoin is continuing to pare gains on Thursday but has only given up a tiny amount of Monday’s surge in the sessions since. It seems there’s plenty of belief in the breakout and while we haven’t seen it build on that in any way, the lack of a significant pullback could be a bullish signal as it faces further resistance around $50,000 and $52,000.

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Bitcoin, Other Cryptocurrencies Gain on Monday

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Bitcoin, the world’s most popular cryptocurrency, on Monday slightly crossed over the $30,000 a coin resistance despite cryptocurrency space remaining largely flat since the Luna coin catastrophe.

A check by Investors King revealed that Bitcoin, Ethereum and other leading cryptocurrencies improved a little compared to last week.

In the last 24 hours, the world’s most dominant cryptocurrency asset has risen by 1.02% to $30,275.28 a coin. While in the last seven days the leading digital asset has gained 2.33% with its total market value improving to $575.085 billion. Investors transacted 875,447 bitcoins valued at $26.432 billion in the last 24 hours.

In the same vein, the second most capitalised cryptocurrency, ETH, the token of the Ethereum blockchain, appreciated by 1.90%  to $2,054.97 per coin in the last 24 hours and 2.48% in the last seven days.  Investors had transacted 6,782,909 ETH estimated at $13.902 billion in the last 24 hours to push ETH market capitalisation to $247.783 billion.

Tether (USDT), the world’s leading stablecoin, gained 0.02% in the last 24 hours to $0.9991. USDT market value also grew to $73.204 billion while investors exchanged 52,015,694,499 USDT worth $51.968 billion in the last 24 hours.

However, BNB, the token of Binance, the world’s leading cryptocurrency exchange platform, appreciated the most. Posting 5.47% in the last 24 hours and 12.48% in seven days. The CEO of the company CZ had said he only invested in tokens with a use case like Bitcoin and BNB. 

Over the years, he has warned people against investing in tokens without a use case and recently he has upped his warning, especially after the Luna coin plunged from $119 a coin to $0.00013 in a week.

“Even though BTC gained nearly 4 percent growth in the past 24 hours, it could not break the US$30,000 level. If BTC can break its initial resistance level at US$31,000 and US$32,000 this week, we may see an upward trend”, Edul Patel, the CEO and Co-founder of Mudrex stated on Sunday before Bitcoin extended its gain above the $30,000 level.

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Bitcoin Plunges Below $30k as Cryptocurrency Market Recovers from Bearish Trend

Bitcoin still remains the number 1 crypto asset in the market with a market dominance of 44.57%

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Bitcoin (BTC), the world’s most dominant cryptocurrency, pared losses to trade at $29,844.20 a coin as the global cryptocurrency market recorded a surge of 4.87% over the last 24 hours.

Checks by Investors King on Coinmarketcap indicate that Bitcoin still remains the number 1 cryptocurrency with a market dominance of 44.57%.

The asset recorded gains of 0.57% in the last 24 hours but dropped 9.26% in the last seven days. The live market capitalisation of the asset is pegged at $564,744,032,506 USD, while the 24-hour trading volume of the coin stands at $31,166,243,069 USD.

While the global crypto market is recovering from the bearish trend that gripped LUNA Coin and other assets last week, only a few top cryptocurrencies have shown signs of recovery.

Bitcoin, which is one of the top-performing cryptocurrencies, hit a 24-hour low of $29,412.58 and a 24-hour high of $31,308.19.

However, the fundamentals show that some investors are holding on to their BTC. One of them is value investor, Bill Miller, who is still bullish about Bitcoin despite recent price declines.

The founder of Miller Value Partners told CNBC that he still owns lots of Bitcoin amid market volatility, noting that he is confident about the prospects of the asset.

Meanwhile, President Nayib Bukele of El Salvador has announced that a meeting of 44 countries to discuss Bitcoin and financial inclusion will hold on Tuesday, May 17.

Bitcoin’s popularity soared after El Salvador’s adopted the coin as legal tender. The meeting is expected to highlight the benefits of using Bitcoin.

”Tomorrow, 32 central banks and 12 financial authorities (44 countries) will meet in El Salvador to discuss financial inclusion, digital economy, banking the unbanked, the #Bitcoin rollout, and its benefits in our country,’’ Nayib Bukele said.

However, despite the popularity enjoyed by Bitcoin, the network has come under criticism over its proof-of-work (PoW) consensus algorithm which is energy-consuming.

The PoW consensus algorithm, which validates Bitcoin transactions, relies on computers run non-stop to verify transactions and create new blocks for the network, a process known as mining. Over the years the number of computers doing this work has also steadily risen, leading to huge energy consumption.

Sam Bankman-Fried, the CEO of the fast-growing crypto exchange FTX, recently highlighted this concern when he stated that Bitcoin is not a suitable payments network.

To be clear I also said that it _does_ have potential as a store of value. The BTC network can’t sustain thousands/millions of TPS, although BTC can be xfered on lightning/L2s/etc,” he told he told the Financial Times via a tweet.




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Professional Investors Expect Major Improvements in the Regulatory Environment for the Crypto/Digital Asset Market

72% of wealth managers, pension funds and other institutional investors expect the regulatory environment for crypto/digital  to improve and become more constructive over the next two years

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According to new research from London-based Nickel Digital Asset Management (Nickel), Europe’s largest regulated and award-winning digital assets hedge fund manager founded by senior traders and investment professionals formerly from major financial institutions including Goldman Sachs and JPMorgan, 72% of wealth managers, pension funds and other institutional investors expect the regulatory environment for crypto/digital  to improve and become more constructive over the next two years. Nickel commissioned research with 200 professional investors from across seven countries who collectively manage around $329 billion in assets.

The study reveals 23% expect no change in the regulatory environment, and just 7% anticipate it will deteriorate.

Some 62% of professional investors expect Germany and the UAE to take a huge leap forward as market leaders in the crypto/digital asset space because of their proactive stance in developing a constructive and robust framework for the crypto/digital asset sector. However, this is likely to lead to other major countries following their lead as they fear missing out – this is the view of 63% of professional investors surveyed.

In terms of when professional investors believe financial regulators will agree a global framework for crypto/digital assets, 23% expect it to happen this year, 29% in 2023 and 28% in 2024, with the remainder anticipating it will take longer.

Overall, as regulation of the crypto/digital asset market develops, 20% of professional investors believe it will be a catalyst for a dramatic increase in wealth managers, pension funds and other institutional investors increasing their allocation to crypto and digital assets. A further 36% believe it will lead to a slight increase in their allocation.

Henry Howell, Head of Business Development, Nickel Digital, said:We are only at the very beginning of the digital asset sector, and the most exciting developments have yet to happen. Record inflows of venture capital in 2021, continued product innovation at the blockchain level and ongoing adoption of the largest players in traditional finance all point to growth of the already multi-trillion-dollar asset class.”




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