In a week where investors sought cover, one asset that had been touted as a potential alternative haven to shield against any market turmoil proved to be anything but that.
In the space of just 10 days, bitcoin,
the world’s largest digital currency, fell through $6,000, then waved goodbye to $5,000 before eventually finding some support ahead of $4,000. All told, the so-called next digital gold lost around 30% over those 10 days and is down more than 80% from its all-time high.
Although just a fraction of the total value of global markets, the demise of the nascent product has burned many of its proponents, who saw it as an alternative to traditional currencies. “Everyone who still believes in cryptocurrency bought all they could afford months ago and now there is no one left to buy,” said Jani Ziedins of Cracked.Market in a Friday note to clients.
Further reading: Bitcoin is imploding — here’s where bitcoin bulls and bears see it headed from here
Crypto aside, plummeting oil prices continued to push investors to move out of riskier investments. Oil supply continues to outpace demand, which has fueled a vicious selloff in prices and tensions between the two biggest consumers—the United States and China—have added to the uncertainty.
The West Texas Intermediate front-end contract
fell more than 6% on Friday, moving to its lowest level in more than a year and closed out its seventh-consecutive weekly loss.
“The truth of the matter remains that rising global crude supply coupled with worrying signs of slowing demand have written a recipe for disaster for the oil markets,” wrote Lukman Otunuga, research analyst at FXTM. “With an appreciating dollar rubbing salt into the wound, the outlook for oil prices points to further downside.”
Read: A death cross is forming in U.S. oil, underlining the unraveling of crude prices
Equity markets are in a similar place, as the three major indexes had their worst Thanksgiving week since 2011, according to Dow Jones Market Data. The Dow Jones Industrial Average,
skidded 4.4% and the Nasdaq Composite Index
slumped 4.3% in the holiday-shortened week, their worst weekly showings since March. The SP 500
lost 3.8%, its biggest weekly decline in a month.
Energy-related stocks such as Marathon Oil Corp.
and Devon Energy Corp.
ended down more than 4% on Friday alone.
Meanwhile, bonds have taken off as investors sought shelter from market ructions. The slump in equities and oil prices has helped to buoy prices for U.S. government bonds, pulling the 10-year Treasury yield
to a 10-week low and closing in on its key psychological level of 3%. Only two weeks ago, Treasurys were suffering under a one-two punch of inflationary pressures and expectations for tighter monetary policy, and the 10-year yield nearly hit 3.25%.
A popular gauge of investor fear, the Cboe Volatility Index VIX,
rose 2.1% on Friday to 21.24.
Read: Junk bonds — no longer 2018’s darling — flip to red as the corporate debt climate deteriorates
G-20 and Fed minutes take center stage
Members of the G-20 nations meet in Buenos Aires this coming week, and investors are looking at what happens between President Donald Trump and his Chinese counterpart, Xi Jinping. Given growing protectionism, leaders of the industrialized nations are expected to struggle to agree on a joint statement on trade.
“Expectations have slowly been dialed down about a possible solution in the short-term with the prospect that tariffs could well increase at the beginning of next year from the current 10% to an increased rate of 25%,” wrote Michael Hewson, chief market analyst at CMC Markets U.K.
“While deal expectations have been set to a low level an agreement to not implement the proposed increased rate at the beginning of next year could be described as progress.”
Read: Growing U.S. trade deficit with China may prevent Trump and Xi from year-end deal
Climate change is expected to be another hotbed topic.
Read: Climate change will wreck economic growth, major government report says
Elsewhere, the Federal Reserve will release the minutes of its Nov. 7-8 meeting. The committee has reiterated its plan to raise interest rates three times next year, however, markets have begun to price out the chances, which now stand at 9.5% down from 33.1% on Nov. 8, based off the fed fund futures market where traders can bet on the direction of monetary policy.
Read: Traders betting on a dovish Fed have it all wrong: SocGen economist
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Aaron Hankin is a MarketWatch reporter in New York who covers cryptocurrency and financial markets.
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