Crypto Markets added $11 billion in value last week, as altcoins dominated the market. VeChain pumped +73% , and was the best performer among larger digital assets. Stocks saw modest gains, fueled by the tech, and news from Gilead Sciences regarding its antiviral drug.
Global crypto markets added $11 billion in value last week, with total market capitalization hovering around $272 billion to end the week. The chatter was around altcoins, as Bitcoin only saw +1.6% growth last week. VeChain was the market outlier, going parabolic and surging +73%. Bitcoin was one of the worst performers last week, as it saw its market dominance drop -2.4%. Altcoins like Stellar, Chainlink, and Cardano all rallied more than 20%.
Bitcoin failed to create any momentum last week, as altcoins continued to take market share. Ever since late May, BTC has continued to consolidate with low volatility. According to a report by Kraken, Bitcoins volume in June was weak, showing -31% drop month-over-month. Its trading volume in June was $36.6 billion which represented a four month low. Correlation between Bitcoin & the S&P 500 has continued to be an issue of concern. During June, the correlation sat at 0.65 which is historically high. For those unfamiliar, a correlation of 1.00 would mean that Bitcoin and the S&P 500 are 100% correlated. In addition, it was outlined that Bitcoins correlation to gold fell below the 1 year average as well. Bitcoins transaction counts continue to sit around 300K which is substantially lower than Ethereum and XRP. Lower transaction counts are expected in a “store of value” asset, but the problem right now is that Bitcoin is acting more like a traditional asset with the high correlation metrics.
Bitcoin Hash Rate
On a positive note, Bitcoins hash rate cracked the 1 year high last week. This was a positive indicator given the fact that after the halving, Bitcoins hash rate had fallen more than -20% , testing the December 2019 lows. As mentioned in previous reports, we stated that it was crucial for the hash rate to break through 1 year highs to ensure the mining network was healthy post halving. Going into next week, it will be important for the hash rate to maintain those levels to help build any positive momentum.
Despite Bitcoin trading sideways the last couple months, the digital asset is still up +28% year to date. Even though many technology stocks have taken off in 2020, Bitcoin's year to date return is still higher than any of the top U.S sectors. In comparison to Bitcoin, the following sectors have returned the following on a year to date basis:
- Energy: -38%
- Financials: -23%
- Industrials: -15%
- Real Estate: -8%
- Utilities: -9%
- Materials: -4%
- Tech: +18%
As outlined above, Vechain was the talk of the week, surging +73%. New eyes have been on VeChain after the "Shanghai Municipal Commission of Economy and Information Commission" published a report outlining VeChains potential in the blockchain sector. The report covers positive developments around VeChains partnership with Shanghai Gas. VeChains blockchain is creating new horizons by improving data sharing, trade, and financial innovation in the province of Shanghai. In addition, the report talks about the significance behind VeChain working with Walmart Shanghai. With VeChain being a valuable piece behind the Walmart China Blockchain Tracking system, Walmart has been able to diversify its product offerings.
Stocks finished higher last week, being driven by the technology sector. The Dow Jones Industrial finished the week +1%, and the S&P 500 finished +1.8%. The NASDAQ continued to be the outlier, rallying +4% last week, which puts its year to date performance at +18.3%. Aside from the tech sector, positive news regarding a COVID19 treatment provided a boost of confidence. With cases still on the rise, the Dow and S&P 500 saw modest gains last week, as investors still have uncertainties going into the second half of the year.
COVID19 Antiviral Drug
Positive news surfaced last week regarding Gilead Sciences and their antiviral drug, remdesivir. According to the announcement, new data shows that remdesivir can lower the risk of death for COVID19 patients that are critically sick. It’s believed that the drug can now reduce the risk of death up to 62%. All eyes continue to be on Gilead Sciences, since remdesivir was the first drug that has successfully treated coronavirus patients based on clinical work. Despite rising COVID19 cases last week, the market stayed afloat based on the progress that Gilead Sciences is reporting.
The tech sector continues to make headlines as the NASDAQ Composite has seen +18% growth YTD. In an environment where coronavirus is slowing down many sectors and businesses, tech stocks still have fundamental strengths. Stocks like Netflix have benefited in an environment where more people around the globe are staying home. Netflix stock closed +8% on Friday ( $548.73 / share ), which was another record high. Amazon has surged +70% this year, and Apple has witnessed +30% growth. The tech sector is driving the market right now, and it's arguably the only reason we haven’t seen sharper sell-offs. Despite tech carrying the market on its back, there will come a time when this rally needs to cool off. The Nasdaq “high-low ratio” is right around 1, meaning that many more tech stocks are trading at 52 week highs compared to 52 week lows. The tech sector continues to be overvalued, and it’s a matter of time before investors find out if this is a “bear market rally.”
Cases in the United States continue to climb, which has many investors questioning another potential lockdown. With deaths now surpassing 130,000 , 32 states are now reporting elevated case counts. This has been a negative indicator since some states that were showing signs of recovering such as California, are now experiencing massive spikes. As several states start to roll back reopening measures, investor fear could very well start to remount next week. With areas like Miami starting to shutdown restaurants and gyms again, this is nowhere near where many thought we would be in mid July.
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