January 6, 2021

US Political Drama and Pandemic Under Focus; Bitcoin Tops 35K

US Political Drama and Pandemic Under Focus; Bitcoin Tops 35K

European and US stock futures are very likely to remain under the influence of the coronavirus pandemic and the US political drama. We have two runoff elections in Georgia, and the outcome of this will very much shape the US’s future policies. The Georgia elections will determine who will control the Senate. If Republicans control the Senate, meaning Raphael Warnock and Job Ossaff from the Democratic Party fail to win, Senate will be under the Republicans’ control. This means Joe Biden will not be able to get things done his way. The market is very much pricing in a 50-50 split, which means both Democrats need to win their positions. If we have a split, then with Vice President Kamala Harris’s vote, things will be much easier to swing in Biden’s favor. This also means that there could be a lot more stimulus for the US economy as Democrats previously talked about over $3 trillion of the stimulus package.

Over in Europe, the focus is still very much on the third wave of national lockdown. The UK is already in its third lockdown, and now we are also hearing about more restrictive measures being introduced over in Germany to bring the coronavirus situation under control. There are also concerns about the new strain of coronavirus, which has been found in South Africa. The new strain of Covid-19 appears to inhibit antibody virus, and this means pharma companies may have to go back to their drawing boards. 

Fed Meeting 

On the economic docket, we also have the Fed Reserve meeting today, but this particular event is highly likely to remain on the backbench as traders are going to remain more interested in US politics—the outcome of the Georgia election. 

Geopolitical Tension 

Geopolitical tensions have gone into a higher tier as President Trump has signed another executive order, which bans transactions with eight Chinese software applications. The order will only be effective after Trump leaves office. There is always the possibility that Joe Biden may reverse this order in part or in full, but the task of doing this isn’t going to be that simple.

Bitcoin 

Cryptos have once again started to rally, and today, Bitcoin’s price has thrashed the 35K price level. At the time of writing this, the high of the day for the Bitcoin price was 35,777, and it is highly likely that the Bitcoin price may reach the 40K price level in the coming days. The fact that institutional traders have started to allocate their investments to this particular asset class has really increased the demand for Bitcoin. Now you no longer only have millennials who are after this digital asset, but in fact, you also have pension fund managers who are either allocating one percent of their fund to this digital asset, or they are convinced that this is the asset class that they need to get involved in. The other important aspect of Bitcoin is that it is pretty much inflation-proof as the supply is limited. So what we have started to hear in the market is that demand has started to rise at a level that investors are concerned that there may not be enough Bitcoin left for them to get their hands on. 

Of course, the rally in the Bitcoin price has also pushed other coins higher, and the only one, which is worth talking about, is Ethereum. It has also crossed above the 1,100 price one again and made a high of 1134, which is still below the high which was formed on the 1st of January.