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Bitcoin booms as bond sell off continues

Tesla, man and machine

The rising tide of accommodation lifted asset prices again overnight. The Dow Jones Industrial Average hit another record hit, and Bitcoin charged to a new high just shy of US $44,800. Today’s after the fact explanations cite rapid vaccination rates and President Biden’s stimulus package (again!) as the market drivers.

Bonds provide the one exception. US ten year bond yields rose to 1.17%. The bond market clearly fears rising growth and inflation, and a huge increase in bond supply as governments fund their fiscal support packages. The dichotomy between markets is unsustainable. Share investors and crypto-traders appear to expect an ever expanding pool of central bank support, while bond traders are preparing for a taper. Only one of these propositions can be correct.

A lower US dollar lifted commodity prices, and may have aided cryptocurrencies. Bitcoin’s jump followed revelations in a regulatory filing that Tesla bought $1.5 billion worth of the leading cryptocurrency, and will accept it as currency. Despite the headlines, the best performing currency lately is Cardano, due to its perceived technological superiority.

US reporting season continues. Although just 8 S&P 500 companies reported overnight, 7 beat estimates, helping to fuel further broad market gains. The Russell 2000 index more than doubled the gains of the leading indices as investors scrambled for small cap stocks. Tonight 24 top companies will reveal earnings, including Coca Cola, Twitter, Fox and Cisco Systems.

Asia Pacific traders may be more sceptical about the gains, judging by the tepid support for index futures in overnight trading. With little macro data to guide markets, the region may be looking at higher volumes ahead of holidays later this week.

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