The week that has never been seen before in the financial world is coming to an end, and we are talking about a decrease in the capitalization of the cryptocurrency market by about $1 trillion. It is more or less the same value as if Facebook would disappear from the American stock exchange. However, the crash in the virtual currency market itself did not affect other markets to a great extent.
The Wall Street stock market extended its gains on Friday. This is because investors are focused on the prospects of a strong economic recovery. This belief is strengthened by, among others, the fact that the number of new applications for unemployment benefits in the US fell more than expected - to 444 thousand.
Markit PMI provided information on the development of economic situation in the USA. It looks better than expected. The index set a new record for industry at 61.5 points, and for services at 70.1 points. As Markit reported in a release to the data, private sector companies across the United States signaled an unprecedented expansion in business activity in May. This was driven by the fastest-ever growth in the services sector, while output growth in the manufacturing sector also accelerated on the back of stronger customer demand. Investors are also apparently dismissing inflation risks and fears that the Fed will soon scale back its asset purchases.
WTI crude oil futures rose nearly 2 percent on Friday to above $63 a barrel, recovering from three-day losses. Investors in this market are now optimistic a summer recovery in fuel demand and vaccination programs in Europe and the US will allow more people to travel. But oil is still down more than 3 percent for the week, the most since early April. The reasons may be linked to a huge wave of coronavirus infection cases in India.
Nuclear talks between the U.S. and Iran will reportedly enter the next phase early next week, and their success could lead to the lifting of sanctions on Tehran and an increase in oil supply. The market for the commodity has risen nearly 30 percent this year and returned to pre-pandemic levels in mid-March thanks to expectations that fuel demand will surge with the introduction of COVID-19 vaccines and the reopening of more economies.
The biggest turmoil this week was seen in the cryptocurrency market. Although bitcoin surpassed $40,000 on Friday, it is still down nearly 20 percent for the week, the most since March 2020 when the Covid-19 pandemic hit financial markets. The price of BTC on Wednesday fell as much as 30 percent after Chinese regulators signaled a crash in the use of such assets, warning financial institutions against accepting cryptocurrencies as means of payment. Digital assets, moreover, have come under pressure before. On May 12, Tesla suspended the ability to purchase its cars with bitcoins, citing the rapidly growing use of fossil fuels for bitcoin mining and transactions.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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