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Shares are higher on Thursday, extending gains as markets relax on inflation risks and exact details of what comes from the US Federal Reserve.
The cryptocurrency market is down significantly on the week, having lost $ 1 trillion in market capitalization from its peak of $ 2.5 trillion in early May, said an analyst group led by Nikolaos Panigirtzoglou of investment bank JPMorgan JPM, + 0.92%.
Panigirtzoglou and his team have our call of the day, giving bitcoin a fair value of $ 23,000 to $ 35,000 over the medium term, depending on the relationship between its volatility and gold as the crypto faces new headwinds.
According to the investment banking team, the signal for the latest major challenge facing bitcoin is that the discount on the net asset value of the largest bitcoin fund, the Grayscale Bitcoin Trust, has extended deeply into negative territory. .
Chart via JPMorgan
This reflects the early sale of shares of the trust in the secondary market at the end of the lock-in period for investors.
As the six-month lock-in period expires in June and July, these investors are likely to sell at least some of their GBTC shares, putting downward pressure on GBTC prices and the bitcoin markets in general, said. analysts.
More generally, recent volatility and the boom and bust dynamics of crypto represent a barrier to the adoption of crypto markets by institutional investors, Panigirtzoglou and his team said.
The mere increase in volatility, especially against gold, is a barrier to further institutional adoption as it reduces the attractiveness of digital gold over traditional gold in institutional portfolios, said. analysts.
Starting from the idea that institutional investors take into account the volatility of assets in the allocation of capital, Panigirtzoglou and his team use a bitcoin / gold volatility ratio to assess the valuation of the crypto asset.
Chart via JPMorgan
JPMorgan considers bitcoin to have a theoretical target price of $ 140,000, based on the convergence of bitcoin’s volatility with GC00 gold, + 0.35% volatility, and the equalization of bitcoin and gold allocations in investors’ portfolios.
But bitcoin is poised to be six times more volatile than gold, giving it a fair value of one-sixth of $ 140,000, or $ 23,000.
The best we can hope for in the medium term is that this volatility ratio will partially return from around x6 currently to around x4 by the end of the year, analysts at JPMorgan said. The fair value of bitcoin at four times the volatility of gold is $ 35,000.
Needless to say, a convergence or full equalization of volatilities or allocations is unlikely for the foreseeable future, Panigirtzoglou and his team said.
Table
Chart via irrelevant investor blog.
What is the relationship between bitcoin and stocks?
Michael Batnick of financial blog Irrelevant Investor said he thought it was no coincidence that people were selling everything at the same time in 2020 in stocks, bonds, gold and crypto, but don’t bet on a crypto crash that would destroy stocks.
Our chart of the day, courtesy of Batnick, shows the correlation between bitcoin and the S&P 500 SPX index, + 0.58%.
Sometimes when people talk about uncorrelated assets, what they really want are negatively correlated assets. Such a strategy is hard to come by, Batnick said. With uncorrelated assets, you have to take the bad with the good.
Sometimes bitcoin moves with the stock market, and sometimes it doesn’t.
The buzz
Elon Musk has said he will look to launch the Starlink satellite internet business once its earnings become predictable, likely in a few years. Responding to a user on Twitter TWTR, + 2.65%, the billionaire CEO of electric car maker Tesla TSLA, + 3.54% said that a public announcement earlier than that would be very painful, noting that he would make its best to give long-term Tesla shareholder preference in an initial public offering.
On the American economic front, 411,000 Americans filed for unemployment last week, down slightly from 418,000 the previous week and more than the 380,000 expected by economists, when there were 3, 39 million continued unemployment claims in the week of June 12. Durable goods orders fell in May to 2.3% from -0.8% in the previous period, as the expected US trade deficit widened 2.8% to 88.1 billion. dollars in May, as imports rose 0.8% to $ 232.4 billion. The rate of growth of the US economy in the first three months of 2021 was calculated at 6.4% year-on-year, unchanged in the latest revision. And Richmond Fed Chairman Thomas Barkin said he believed inflationary pressures in the United States were temporary, but the Federal Reserve should be careful and the central bank should monitor prices closely.
Shares of data management firm Confluent are expected to start trading on the Nasdaq, after the Mountain View, Calif.-Based group valued its IPO well above its forecast range on Wednesday night. Confluent valued its shares at $ 36 each, above the $ 29- $ 33 range estimated by the company last week.
Financial services firm Visa bought fintech group Tink, an open banking platform, for 1.8 billion ($ 2.15 billion) from Swedish bank SEB.
John McAfee, the maverick software pioneer who created the antivirus software that bore his name, was found dead in his Spanish jail cell on Wednesday in an apparent suicide. His death came hours after a court approved his extradition to the United States to face tax charges, which may have sentenced him to decades in prison.
The steps
US stocks advanced at midday DJIA, + 0.95% SPX, + 0.58% COMP, + 0.69%, joining the good performance of European stocks SXXP, + 0.01% UKX, + 0.11% PX1, -0.09% DAX, -0.13% and equities in Asia NIK, + 0.66% HSI, +1.40% SHCOMP, +1.15%, which were decidedly in the green.
Random readings
Battle over Birdsong: A dispute between two neighbors in the English suburbs over birds in a tree straddling their property ended with the tree being cut in half.
Dirty clothes on the moon: Astronauts don’t do laundry in space, they wear clothes until they can no longer bear the smell, then eject them to burn them in the atmosphere. NASA and detergent maker Tide have teamed up to change that.
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