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(+) Asian Market Update – Thursday: Cryptocurrencies Tumble; Asian Stocks Move Up

Originally published on: CCN
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December 28, 2017

It’s amazing how fast the future comes at you.

Just a few years ago we were theorizing about how the crypto market may come to replace the Foreign Exchange market. Earlier this week, business insider has reported that the volumes in the cryptomarket are now comparable to those of the New York Stock Exchange.

As we can see from the data, a typical day at the NYSE produces an average turnover of $41 Billion. Some days are more than $100 Billion and some days less than $25 Billion.

The crypto market has advanced exponentially this year. On January 1st the total turnover was about $120 Million but by now they’re consistently surpassing $30 Billion.

However, as the author points out, there’s still a long way to go to reach the $5 Trillion daily turnover that is seen in the global currency markets. After seeing what’s happened in 2017, it’s already easy to imagine that this may somehow be possible in the year ahead.

@MatiGreenspan
eToro, Senior Market Analyst

Traditional Markets

Wall Street came back from their long weekend with a bit of a hangover. It’s quite common for large hedge funds to close out their positions and realize some of their profits by the end of the year. It looks good on their reports.

The main target was Apple, which fell about 2.5%. After a 53% gain in share price this year, the retracement looks pretty normal and I wouldn’t doubt that many investors will see this as a discount. Though the losses were not staggering, it did manage to bring down the major indices, which ended at a bit of a loss.

Unfortunately, it seems that the Asian markets have detected the sour sentiment from New York. Though the Nikkei is only slightly down, the China50 dropped 2.5% today. Contrarywise, the markets have just opened in Europe and though volumes are likely to be weak during the holiday season, the boards are all green for the Dax and his pals.

Commodities Jump

Gold and Oil seem to be benefiting from the low liquidity holiday season trading. Both have made significant gains the last few days.

Gold actually saw a drop at the beginning of the month and so now is only recovering from that. Oil on the other hand, has seen a shift in trend over the last few months and has now touched $60 a barrel for the first time since mid-2015.

Many analysts are pointing to a pipeline explosion in Libya as the cause for the price surge yesterday. To me, that’s a hard story to swallow really. It’s really difficult to see such an occurrence as having much of an impact on the long term balance between supply and demand of this global market.

More likely, the news of the explosion caused traders to focus their energy on crude oil. That together with low liquidity during the holidays and a weaker US Dollar gives us a more complete picture.

Ripple Explosion

Though Bitcoin regained a lot of its composure yesterday, it’s Ripple that should be making the headlines.

The Ripple network is a bit different from most other blockchains in that Ripple is a private company and their protocol is maintained as such. So it’s not completely open source like the rest but it still is included in the overall asset class we call cryptocurrencies since it does make use of the distributed ledger technology.

Ripple’s aim is to replace the swift system that is currently being used to send money from one bank to another. If you’ve ever sent an international wire transfer, you know that it usually takes between two and five business days and costs about $25. Ripple can do this in seconds for pennies.

Every transaction that is sent through the Ripple network burns a small amount of XRP tokens, as a payment for the transfer. Those tokens then disappear and can never be used again. This means that the overall economics of the coin are super deflationary. Meaning, over time the supply dwindles causing the price to rise.

However, to counteract this Ripple has started with a monumental amount of 100 Trillion tokens. Though they’ve recently locked up more than half of this supply in a long term escrow account, there is still a current circulation of almost 39 Trillion XRPs.

The price gains have been intense. At the start of the year each token was a fraction of a penny and in December alone it’s come from 23 cents to $1.17 this morning for a total gain of 408%.

I’ve already heard several people tell me that it’s actually cheap at around $1 but we do really need to think about the total supply in the market. Compared to bitcoin’s current supply of about 16 million and Ethereum’s 96 Million.

In the end of the day, the value will be determined by the banks. The more financial institutions use it to set up payment gateways the more they will need XRPs to facilitate the transactions.

However, in the long term, there may actually be a real cap on the amount this toke can grow. The more expensive the tokens are the more the transactions will cost. For now, it’s extremely cheap to send a Ripple transfer but at some point, if XRP gets more expensive it may be seen as less viable.

Sorry for getting the report out a bit late today. Wishing you an amazing day ahead!

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework. 

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