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Bitcoin booms, optimism abounds

Bitcoin booms, optimism abounds

It looks like Santa is bringing cryptocurrencies this Christmas. Bitcoin soared over US$23,000 overnight, having breached the previous all-time high near $20,000 just 24 hours ago.

The boom in cryptocurrencies is occurring in an atmosphere of general optimism. Shares and industrial commodities also rose overnight, and the increasing economic confidence saw the US dollar drop to an almost two-year low.

Rising infection rates are having little to no impact on sentiment. French shares closed in the green despite news that President Macron had tested positive for the virus. Similarly, record infections and deaths in the US didn’t prevent the S&P 500 index setting a new all-time high. Weaker unemployment data not only failed to quell the enthusiasm, it spurred more buying as traders bet the bad news will push politicians into passing a stimulus package.

Bonds sold off modestly again, but gold rallied. The strength in gold is not fully explained by a lower US dollar, and suggests not all investors are convinced of smooth sailing through 2021.

Crude oil markets responded to a surprise draw of more than 3 million barrels last week by boosting prices even further. Copper, aluminium and iron ore made solid gains, and the coordinated moves across the industrial commodity complex are another sign of economic confidence. Dalian iron ore futures closed at a record 1,084 yuan per tonne.

Australia investors face a bind today. The strength in shares, commodities and the Australian dollar point to a positive trading day. However yesterday the most populous state recorded a 17 person Covid-19 outbreak. These are the first community transmissions in weeks, and although the overall infection rates are low, it may stifle upward momentum today.