It Was a Massive Week Across Markets, and Bitcoin Was No Exception

As news of Federal Reserve meetings and unrest in the Middle East had produced some fear, investors have responded with relief and driven prices to new short-term highs. Bitcoin’s massive pump over $11,000 may well be riding the coattails of the overall market increases.

Stocks and Bonds

The stock market has enjoyed an unprecedented rise over the past two years. Some attribute the growth to Trump’s economic policies. Others see the market simply as responding to a growth-cycle economy. While the past month has seen some fear in the market, this seems to have evaporated. The S&P 500 rose to a new all-time high. The index gained a massive 2.3 percent to $2964.15, driven largely by the tech and energy sectors. Even the treasury market saw dramatic increases, crushing yields for the market. Yields closed at 1.973 percent after the week, just below the important two percent benchmark. The yield has not been this low since Thanksgiving, 2016.

Commodities

Both gold and oil enjoyed a stunning week of immense growth. Oil was the big winner of the week, gaining a stunning 9.4 percent on the week. This growth was helped by the escalating tensions in the Middle East around aggressive behavior from Iran. The growth is the highest single-week jump since December 2016. Not to be outdone, gold had dramatic gains as well, breaking above $1,400 the first time since 2013. The gains in gold appear to be spurred by the relative uncertainty in international markets — both in the US and abroad.

Bitcoin

Bitcoin also had a remarkable week, as investors moved back into the cryptocurrency in force. The price jumped over 10 percent, briefly reaching short term highs over $11,100. Generally, investors would expect to see capital entering Bitcoin when stocks are lower and bond yields have increased. This would be the expected result of a declining market, where investors are seeking store-of-value (SoV) assets like gold. However, the normal market dance has not followed its steps properly, as both equities and SoV assets have increased.

Melt Up?

As the Fed’s meeting hit the news, markets all responded positively. The announcement that a rate cut could come as early as July sent a shockwave of growth — with investors hoping for cheaper money overall. However, this type of broad-reaching increase is not always a good sign for the economy in the long term. Some have suggested that just such a boost would occur, signaling the potential for a melt-up — an unsustainable jump in values led by overly-cheap access to money. A melt up is dangerous as investors run headlong into various markets, only to see declines way below the entry point. Such an event would indicate that the economy is not actually as stable as the short-term gains would suggest. DO you think the overall bull market is a sign of economic stability, or will the coming weeks see investors fleeing the melt up? Let us know in the comments below!