Mati Greenspan, Senior Market Analyst at FX broker eToro, has provided his daily commentary on traditional and crypto markets for October 8, 2019. The text below is an excerpt and does not contain the full analysis.
Hi Everyone,
Once again, the stable coin known as Tether is under heavy fire and as this drama plays out the stigma threatens the reputation of the entire crypto market. Not that crypto had such a pristine reputation to begin with but the nature of these specific allegations directly calls into question price stability in an already volatile market.
A class-action lawsuit has now been filed in the State of New York with claims of fraud and market manipulation and the plaintiffs are asking for upward of $1.4 trillion.
The claim is that Tether, in collaboration with Bitfinex, printed unbacked USDT out of thin air in order to buy bitcoins for their own private stash and to prop up the price.
Now, I’m not saying if these allegations are true or false, that’s for the court to decide. What I will say is that in major financial institutions across the globe, the process of creating unbacked currency for the purpose of purchasing financial assets and propping-up market prices is simply known as common practice.
So if anyone is worried that the price of bitcoin has been ‘pumped’ please take a moment to think about the effects of a full decade of ample quantitative easing and other liquidity injections multiplied by the fractional reserve system and how this might’ve affected the value of stocks and bonds.
Due to a local holiday, there will be no daily market update tomorrow. We’ll resume on Thursday the 10th.
Today’s Highlights
- Lawsuit filed claiming Tether printed unbacked USDT to buy bitcoins: Courts will decide whether the allegations against Tether are true or false, but it’s worth considering that the process of creating unbacked currency for the purpose of purchasing financial assets and propping-up market prices is common practice in major financial institutions across the globe.
- Wall Street analysts play “beat the estimates:” Since 2015, there hasn’t been a single quarter where the estimates were higher than the actual results. As earning’s growth in the United States has been negative for the first and second quarters of this year, things aren’t looking particularly optimistic for the third quarter.
- Crypto bounces off support levels: While this was a welcomed change of pace, at this point, it’s hard to say if it will continue or not.
Please note: All data, figures & graphs are valid as of October 8th. All trading carries risk. Only risk capital you can afford to lose.
Traditional Markets
As we push forward to the end of the year, the market’s ever diagnostic gaze turns to earnings season. Never forget that no matter what happens in politics, trade, or anything else, the only thing that stocks derive value from are profits.
Wall Street analysts have a little game they like to play called beat the estimates. The way it works is that they set their profit forecasts so low that when the company reports their numbers better than the self-imposed forecast, they can claim that ‘earnings beat estimates’ and the stock can fly.
In this graph, we can see the total earnings growth per quarter for the S&P 500 in blue. The analysts’ estimates are here in grey. As you can see, since 2015, there hasn’t been a single quarter where the estimates were higher than the actual results.
To put it lightly, earning’s growth in the United States has been negative for the first and second quarters of this year. Things aren’t looking particularly optimistic for the third quarter.
Also, watch out for Chairman Powell’s statements today and tomorrow. They could prove useful given the rapid shift in sentiment regarding rates that we mentioned in yesterday’s update.
Crypto Video
That’s really all I got for today. Yesterday’s crypto bounce off support was really a welcome change of pace but at this point, it’s hard to say if that will continue or not.
Make sure to check out our weekly interview with CoinTelegraph where we discuss current levels of support for bitcoin, what caused the XRP bounce, and how much crypto to be holding.
Mati Greenspan can be found on LinkedIn, Twitter, or etoro.
This is a marketing communication and should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been prepared without having regard to any particular investment objectives or financial situation, and has not been prepared in accordance with the legal and regulatory requirements to promote independent research. Any references to past performance of a financial instrument, index or a packaged investment product are not, and should not be taken as, a reliable indicator of future results. eToro makes no representation and assumes no liability as to the accuracy or completeness of the content of this publication, which has been prepared utilizing publicly-available information.