Federal Reserve Soup Now Includes Bitcoin, DeFi, Silver, GameStop.
Market news from crypto to Wall Street is all over the place as analysts wonder if the Fed will have mettle to “taper” once the economy reheats.
Ether (ETH), the second-biggest cryptocurrency, rose toward a new record, potentially fueled by fresh interest in the blockchain’s decentralized trading systems amid widespread dismay over the retail-investing platform Robinhood’s handling of the GameStop saga. (See Token Watch, below.)
In traditional markets, European and Asian shares rose and U.S. stock futures pointed toward a higher open, amid renewed optimism for economic stimulus and the distribution of coronavirus vaccines. GameStop shares lost nearly a third of their value on Monday following last week’s 400% short squeeze.
Silver, whose prices had shot up to an eight-year high after a series of posts on Reddit’s WallStreetBets forum calling for a “short squeeze,” tumbled as some commenters pushed back against the narrative; precious-metals analysts for the lenders HSBC and Commerzbank warned that the rally would be hard to sustain. Gold weakened 0.6% to $1,849 an ounce.
With the coronavirus vaccine distribution well underway, Wall Street analysts are sketching out what the economy might look like as 2021 unfolds and social-distancing measures recede.
The short answer is that activity is set to heat up, which could also provide the first real test of the hidden inflationary pressures that might have built up over the past year. Whatever happens will likely prove crucial for the bitcoin market, since the cryptocurrency has become one of the most popular ways for big investors to bet on the likelihood of rising prices or dollar debasement.
The U.S. Congressional Budget Office projected on Monday that gross domestic product will expand by 3.7% this year, after a 2.5% contraction in 2020. But Bank of America, the second-biggest U.S. lender, is even more optimistic, recently boosting its forecast for this year’s growth to 6%, from 4.5% at the start of the year.
A key question for the inflation-watchers, of course, is just how much stimulus money will be pumped into the economy by the U.S. government and the Federal Reserve.
President Joe Biden has proposed a $1.9 trillion stimulus bill, but a group of senators from the opposition Republican party on Monday released details of a $618 billion proposal they argue is more appropriate. Bank of America’s analysts assume the package will end up around $1 trillion.
Why it matters is that as Americans start to get out and about, a surge in consumer spending looks likely. The Bank of America analysts estimate there’s already some $1.6 trillion of excess savings that might start to trickle into the economy.
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