Bitcoin bubbles as Australian dollar floats along

See the latest Australian dollar analysis here:

Macro Afternoon

Markets are plain ignoring the political chaos in the US, with the local stock market up nearly 2% and S&P futures up 0.6% as Congress re-convenes.Bitcoin continues its unsustainable but wondrous to behold move higher, hitting the $37000 level overnight and slightly below that level going into the afternoon session. Note the crypto currency has doubled in less than a month, after gapping above $18500 mid December = this will end well of course:

Meanwhile, the Aussie dollar is swimming along, drifting just below the 78 handle that it breached last night. The wide trend channel from mid-December shows its slightly overbought and ready to get back to the low 77’s as part of an overall trend as it makes its way up to 80 cents:

The AFR’s latest forecaster round up still has the Pacific Peso pegged at 78 cents versus King Dollar, mainly due to the expectation that iron ore can’t go any higher, but also under pressure from more RBA asset buying:

Almost no forecaster is counting on iron ore prices to remain at the elevated levels seen at the end of 2020 in 2021, but nonetheless the outlook for Australia’s most important export commodity is favourable.

The impact of ongoing QE on the local currency is likely to be the determining factor in swaying the Reserve Bank to expand its asset buying program this year, some experts say. That adds to anticipation of ongoing quantitative easing (QE) from central banks in the US, Europe and Asia weighing on the value of their respective currencies, and lifting the Australian dollar in turn.

But with COVID-19 vaccines now being distributed in a number of jurisdictions and commodity-hungry Asia on track for strong activity, nine forecasters expect the currency to hit US80¢ or beyond.

Yarra Capital Management’s head of macro and strategy, Tim Toohey, thinks US85¢ is a realistic level, while Goldman Sachs’ Andrew Boak and HSBC’s Paul Bloxham expect to see the Aussie-US cross at US81¢.

It’s not out of the realm of possibility to get as high as 85 cents by the end of the year, but the acceleration required is not one that’s been recorded before, with the 2017 highs at 80 cents more probable:

By the way, Pound/Aussie cross is cracking, as I mentioned yesterday:

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Comments

  1. the rise of BTC over the last few years seems to mirror the rise of the human population /plague over the last 200 or so… anyone dare to chart them along-side one-another? anyone dare predict which will come crashing down first? What goes up must come down…?

  2. ” this will end well of course:”

    It has ended well for everyone who has bought BTC at any time during the last 10 years, including those who bought at the most recent bubble high. Not saying people shouldn’t be cautious, they should, but I think the simple bubble narrative doesn’t seem to apply here. Main reason being, the majority of the world’s population still don’t own any. It’s not like everyone and their grandma is clamouring to get it right now. Maybe this has a ways to go yet.

    • FUDINTHENUDMEMBER

      Bubble narrative can definitely apply and BTC can still be of greater value in future. Not mutually exclusive ideas. Lot of folks gonna get wrecked as usual though getting sucked into “trading” various coins and tokens of nefarious value. Same as it ever was. For someone to be making money, someone else has to be giving it away.

      • Bit unusual to have 4 bubbles in the space of ten years though don’t you think? And each time with much higher highs and higher lows. Is there anything else in history comparable? Does simply looking at charts provide a suitable explanation?

        • FUDINTHENUDMEMBER

          I’m only saying that bubbles can happen, and burst, in any asset, which may in future still have a greater real world value. Ie. The millennium bubble was a definite thing, but now stock indices are far higher than their 2001 peaks.

      • “For someone to be making money, someone else has to be giving it away.”

        I don’t think the world is a zero-sum game. Value is being added all the time. Just look to history.

          • Value is determined by supply and demand. No economics textbook mentions anything about whether something needs to be tangible to have a price.

            Fortunate too, otherwise I wouldn’t have a job. (Software)

          • Can you explain why you call Bitcoin “digital tulips”. Obviously it doesn’t resemble a flower in any way.

          • It’s value is not determined by supply and demand, It’s value is only derived by its transfer to fiat.
            supply and demand only determine its exchange price.

          • “It’s value is not determined by supply and demand, It’s value is only derived by its transfer to fiat.
            supply and demand only determine its exchange price.”

            Splitting hairs? I still don’t see tangibility anywhere in there.

            Maybe this is why LVO is the only one who doesn’t seem to write about Bitcoin in this way (afaik). He’s an actual real economist.

          • Price is determined by supply and demand. Value is determined by utility and scarcity. And I call Bitcoin digital tulips because it is inherently of little value (I would say worthless) yet trades at fantastic prices. And if you didn’t understand the allusion then I’m not sure you’ll understand the explanation.

        • FUDINTHENUDMEMBER

          My point here is that many folks get into “trading” during a mania. It’s very easy to trade long when every “asset” is going up. The inexperienced give it back to the market after it turns around or flatlines. So easy to get emotionally dragged into the gambling side of the blurry line that is trading/gambling spectrum.

        • The world may not be a zero sum game, but asset markets are. For you to be making money, someone most definitely has to transfer it to you from them. Every body’s asset sell and buy totals when summed together will equal to 0 as every transaction has two sides. This is the definition of zero sum.
          Whether that counts as a loss or not is a matter of perspective, often obscured by inflation.

  3. Lol not only ignoring/looking through everything, markets also seem to be double dipping with rises on look through and rises on any actual outcome. Boom boom!

    • Ah Mr Ding. I see at least you, unlike everyone else it seems, haven’t abandoned me. I was just reminiscing the other day when we were mocking ‘the excellent’ David Bowie on his prediction for aud to 75c while in the middle of the March flushing. Good old days those. Now seems like the poo has morphed into Mr Hanky and is singing and tap dancing all over the place.

  4. was thinking of buying again but Gav put me off when he announced his entry into BTC. Thought by now I will buy BTC for $2.

    • nowhere for few weeks. Look at rates for UST. Until people realise those rates will never be higher than inflation.