Bitcoin Surges to $70,000, Jobs Report Impresses, CrowdStrike Boosts Cyber, and Market Trends Ahead of the U.S. Election
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By: Alex Nahigian
In this week's rundown, we analyze major events from this past week, including taking a deeper look into Bitcoin's historic leap, February’s jobs report, CrowdStrike's massive earnings beat, and election year market trends.
What You Should Know Going Into Your Week
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Bitcoin Breaks $70,000 as Crypto Rallies
The price of Bitcoin climbed to the $70,000 mark for the first time ever on Friday as the cryptocurrency rose as high as $70,100.00, up 10% on the week. Crypto trading has been extremely volatile this past week after Bitcoin declined 10% on Tuesday after hitting an all-time high record. Furthermore, the Bitcoin historical volatility index is at its highest level in almost a year.?
MUCBC’s President, Rob Nahigian , and senior member, Mickey Fanella , both sat down with Goldman Sachs digital assets analyst, Solomia Semenyuk , on Capital Academy ' podcast, Inside the Street, to discuss Solo’s work in blockchain and cryptocurrency. Solo’s group on Wall Street is among the leaders and pioneers of the respective space and went into further detail on the current digital landscape.?
Generally speaking, what are the fundamentals of cryptocurrencies like Bitcoin, and what drives their prices? To start, Solo laid out the foundation of a cryptocurrency, which is “a digital or virtual currency that is secured by the blockchain it's built on by a cryptography, or computer code. This makes it really hard to counterfeit or modify as the crypto is built on an immutable network, which means anything that gets altered is publicly viewed, including all transactions depending on the blockchain.”
“Bitcoin is also a commodity, which means it’s valued very differently than say Ethereum, which is valued more like a growth equity, which is heavily dependent on the growth and activity of the Ethereum network.” For Bitcoin, fundamental value can be found by looking at how expensive it is for Bitcoin miners to mine, which is connected to efforts to ensure the legitimacy of transactions added to a blockchain and to keep the Bitcoin network secure. Networks also have extremely strong communities behind them, which have experts in the space who are constantly improving the code behind the blockchain, largely contributing to price appreciation.
Solo remarked that major banks are starting to tap into blockchain networks, which has “made it cheaper for large scale institutions like Citi and J.P. Morgan to offer lending to clients,” as transactions on blockchain networks are cutting costs in the process. Solo emphasized that “asset managers are also issuing funds on blockchains as a result of improving liquidity on the networks. And by issuing securities on blockchain, collateral becomes more liquid, meaning these companies are being exposed to more investment opportunities” because they have quick collateral options for virtually anything.?
It’s definitely an exciting time in the crypto sphere and within the realm of digital assets. Bitcoin’s performance alone this year is a tremendous rally, and investors have a real opportunity to capture such growth. BlackRock’s Bitcoin ETF AUM beat all ETFs issued by BlackRock in the past two years, on top of the largest commodity issuances. And in Solo's eyes, it’s going to happen again when Ethereum’s ETF gets approved.?
It will be super interesting to follow this space, and we encourage investors to do the same as major banks on Wall Street continue to demonstrate legitimate interest in cryptocurrency and blockchain, which indicates that all the hype is looking pretty real.?
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Nonfarm Payrolls Rise, So Did Jobless Rate
February job creation was strong as the labor market saw an addition of 275,000 new jobs last month, topping consensus expectations of a predicted 198,000 jobs added. Despite the increase in nonfarm payrolls in February, the jobless rate reached its two-year high, rising to 3.9% above Wall Street’s 3.7% target for the month.?
Let’s take a look at the breakdown by the numbers from CNBC. From a sector standpoint, healthcare led the job surge with 67,000 new jobs. Government again was a big contributor, with 52,000, while restaurants and bars added 42,000 and social assistance increased by 24,000. Other gainers included construction by 23,000, transportation and warehousing by 20,000, and retail by 19,000.
On the flipside, the jobless rate trickled up to its highest in two years, which calls into question some of the statistics. Per CNBC, the household survey, used to calculate the unemployment rate, showed a decline of 184,000 among those employed. The increase came even though the labor force participation rate held steady at 62.5%, though the “prime age” rate increased to 83.5%, up two-tenths of a percentage point.?
The current job growth is encouraging, but we urge you to look below the surface. In this newsletter, we mentioned this last time for the January jobs report that the numbers aren’t exactly what they seem. January’s whopping 353,000 increase in nonfarm payrolls was revised down by over 35% to 229,000. It was the same case in December when we saw the 330,000 jobs added trimmed to 290,000, which was 167,000 fewer jobs than we thought between the two months. That being said, don’t be surprised if February’s numbers are later cut to somewhere closer to what expectations actually were.
CrowdStrike Delivers Massive Win For Cyber?
Cybersecurity company CrowdStrike, saw shares skyrocket 21% after hours on Tuesday after a massive earnings beat on top and bottom lines, in addition to strong year guidance. CrowdStrike’s optimistic news generated a huge win for the cybersecurity industry after sharp declines from Palo Alto Networks and Zscaler following earnings reports and general outlook.?
CrowdStrike beat estimates on a number of fronts. Here’s how they did: earnings per share crushed expectations, coming in at 95 cents adjusted, versus 82 expected. Revenue was posted at $845 million, $6 million more than the expected $839 million. The cyber company also brought in total net income of $54 million, up $102 million from last year's $48 million period loss.
CrowdStrike’s win comes amidst what analysts are calling “cyber fatigue,” which has seen major cyber companies lose millions in valuation and large sums in share price. However, the negative downturn seems a little unrealistic. CrowdStrike’s exceptional full-year guidance cements the case that the demand for cybersecurity and protective cloud-based technologies is steadily increasing. Our society is becoming increasingly interconnected digitally, and as artificial intelligence is deployed all over the world, hackers are getting their hands on dangerous cyber weapons. Cyberattacks are at an all time high, and cybersecurity is a must-have for the future.?
Analyzing Market Tendencies Ahead Election Years
Former President Donald Trump seems to be set for the Republican nomination following Super Tuesday voting that saw his final opponent, Nikki Haley, officially end her campaign for president. Joe Biden also won big, as we appear to be in for a 2020 rematch this November. Looking at things from an economic standpoint, election years play a huge role in what happens in the markets, and we will take a look into historic trends and what the markets are preparing for come election day.?
According to Morgan Stanley, every election year has seen, on average, 11.28% in total gains in the S&P 500 Index. Approximate returns by party are about 15.3% when a Republican wins office, and 7.6% historically when a Democrat wins the presidency. The sitting administration is also known to ratchet up government spending before a presidential election in an attempt to bolster their case for re-election or set up their party’s candidate for success. It’s crucial that whoever controls the White House in the year of an election doesn’t suffer major setbacks such as an economic downturn or geopolitical concerns ahead of November.?
The markets are bracing for substantial impact as both candidates have policy implementations that could affect global markets. When it comes to gross domestic product, Trump says he would consider 60% tariffs on Chinese goods, which could lop as much as 0.7% off China's GDP. Trump intends to reestablish the United States as the leader on the international stage, which could see Europe, for example, look to build stronger military capabilities, which has been a catalyst for defense stocks doubling in value over the past three years.
Foreign exchange is at the center of the talk as currency markets appear to already expect higher volatility, with euro/dollar options volume expiring on the day after an election at almost four times higher than usual. Trump's 2016 victory saw the Mexican peso drop 8% in a week, while his defeat in 2020 fueled a 4% rally solely on the basis of trade relations.
2024 will see more than 50 countries worldwide head to the polls, including seven out of ten of the most populous nations in the world. With combined populations of about 4.2 billion, the countries voting this year will mean over half the world will have a major say in government around the globe.?
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Weathering Wall Street references CNBC and Bloomberg for research.