Bitcoin hits record high as US dollar slides – as it happened

Other European markets also ended the day lower, with France’s CAC dipping 0.2% and Spain’s IBEX down 0.25%, as the risk-on rally runs out of steam.

The weakness of the dollar may not have helped. The euro is trading at its highest level since April 2018, at $1.228, which will not help exporters.

Bitcoin’s is benefitting from dollar weakness, though. The cryptocurrency is back up at $28,144, up 4.65% today, and not far off its earlier record high ($28,575).

Ed Moya of OANDA says Bitcoin could actually be benefitting from regulatory pressures on the crypto market.

Bitcoin mania is running wild as bearish bets against the dollar rise to the highest levels since 2011. Macro crypto traders and haters of fiat currencies remain blindly ultra-bullish and that could help Bitcoin test the $30,000 level before the year ends. In the past Bitcoin would see weakness on regulatory concerns, but prices seem resilient despite the latest problems with XRP, at one-point last week was the world’s third largest crypto.

Coinbase, a cryptocurrency exchange, decided to suspend trading in XRP after the SEC sued Ripple for illegally selling unregistered securities worth $1.3 billion. Regulatory fears have always posed a risk for Bitcoin, but for some institutional investors the price crash with XRP was a reminder that Bitcoin is best positioned to handle new regulatory restrictions.

That’s all for today. Here’s our Bitcoin story:

Goodnight! GW

The UK stock market has ended the day in the red, despite the news that the Oxford/AstraZeneca vaccine has been approved in the UK.

The FTSE 100 index has closed down 47 points, or 0.7%, at 6555 points. That hands back almost half of yesterday’s rally, which had taken the index to its highest close since March.

Banks and travel companies did rise, with NatWest finishing 1.3% higher and airline group IAG up 1.17%.

But mining stocks, utilities, industrial firms and healthcare all fell, with even AstraZeneca closing 0.8% lower.

The strong pound will have dragged back some major exporters; it’s trading around $1.36, up a cent, as the Brexit deal is approved by MPs.

But the smaller, more UK-focused, FTSE 250 dropped by 0.87%, having hit a 10-month high yesterday. So hardly a vintage performance for the Footsie.

Missed this earlier, sorry, but Germany’s stock market has closed for the year - with an annual gain of 3.5%.

Although the DAX ended today slightly lower (-0.3%), it’s still the best-performing major European market, having more-than-clawed back its pandemic losses.

Overall, the Stoxx 600 is down around 3.5%, with the UK’s FTSE 100 around 13% lower than a year ago (and a half-day session to come tomorrow).

US crude oil stocks have fallen by more than expected.

The Energy Information Administration reports that crude stocks dropped by 6.1m barrels in the week to Christmas Day. Analysts had expected a drop of around 3m barrels

Gasoline inventories fell by 1.2 million barrels, while distillate inventories (including diesel and heating oil) rose 3.1 million barrels, the EIA adds.

That rise in distillate stocks is higher than expected, and may signal weaker demand. John Kilduff, a partner at Again Capital Management in New York, explains (via Reuters)

“The decline in diesel fuel demand, distillate fuel demand, signals the end of all of us seeing the Amazon trucks every five minutes on your street, so I think we’re going to see that decline in the post-holiday period.”

The crude oil price has dropped back from its earlier highs, and is now flat on the day (leaving Brent crude at $51.2 per barrel).

More economic data: US home sales have dipped, but remain sharply higher than a year ago.

The pending US home sales index dropped by 2.6% in November, a month in which Covid-19 cases rose sharply across America.

But, sales are still 16.4% higher than a year ago, partly due to pent-up demand following the lockdown earlier this year. Also (as in the UK) some families are keen to move to larger, rural properties -- plus, there’s a shortage of houses on the market.

US stocks have opened higher in New York as traders continue to show optimism about a vaccine-led economic recovery, and new stimulus measures, in 2021.

• Dow Jones industrial average: up 137 points or 0.45% at 30,472
• S&P 500: up 14 points or 0.37% at 3,741.
• Nasdaq: up 47 points or 0.37% at 12,897.

Investors are watching to see whether the Republican-controlled Senate bows to pressure and approves larger stimulus checks, as demanded by Donald Trump (the measure was blocked yesterday).

Then there’s the crucial Georgia’s runoff elections, next week, that will determine whether Democrats or Republicans control the US Senate.

Saxo Bank’s head of FX strategy, John Hardy, explains:

First is the US Senate treatment of the larger stimulus checks followed next Tuesday by the key Georgia Senate run-off elections that could yet allow Democrats to set more of the agenda under the Biden presidency.

Economic news: The US trade deficit in goods widened in November to $84.8bn, from the $80.4bn recorded in October.

Marketwatch has spotted that this is a record high, “reflecting weaker US exports tied to the coronavirus pandemic”.

The Census Bureau reported that exports increased $1.1bn month on month (to $127.2bn), while imports rose $5.5bn (to $212bn), pushing the goods deficit up by around 5%.

View image in fullscreen

Russ Mould of investment platform AJ Bell has a good take on bitcoin, and its prospects for 2021:

“Nelson Bunker Hunt once espoused the view that ‘Almost anything is better than paper money. Any fool can run a printing press.’ Although the magnate’s attempt to corner the silver market came to grief in 1980 some investors appear to agree with him right now, given how gold and especially bitcoin are performing.

Gold reached a new all-time high in 2020 and bitcoin has set a string of new peaks, more than trebling in the second half of the year to pass the $28,000 mark for the first time.

Some will argue that there is more to come from both gold and bitcoin, especially if governments keep piling up debts and central banks do their best to fund that borrowing through the backdoor with QE, zero interest rates and bond yield manipulation, thanks to their scarcity value relative to cash. Bitcoin’s supply is fixed at 21m units and gold supply grows at barely 2% a year, as the metal is hard to find and expensive to mine.

Others will argue neither gold nor bitcoin have intrinsic value, as they do not generate cash. Some will even argue that bitcoin is just a glorified Ponzi scheme, as new money flows in at the bottom to help the smart money that got in early bail out at the top. In 2021 investors will get their chance to pay their money and take their choice as to whether they see bitcoin and gold as stores of value, and useful portfolio diversifiers, as governments and central banks conjure money out of thin air, or more trouble than whatever they may (or may not) be worth.

Supporters of bitcoin argue that it is the future of money, free from government interference and money-printing devaluation, and a legitimate asset with growing support from major investors and services like PayPay.

But there are potential hurdles ahead, and sceptics.

Earlier this week, Jesse Cohen, senior analyst at uk.Investing.com, predicted that bitcoin will face further scrutiny from regulators in the United States and Asia.

While many expect the Bitcoin rally to continue in 2021, I’m more concerned with what the Biden administration could mean for cryptos. Incoming Treasury Secretary Janet Yellen in the past has warned investors over Bitcoin during her time as Fed Chair, calling it a highly speculative asset and not a stable store of value.

I expect Bitcoin to remain highly volatile to the downside in the new year, given the potential for more scrutiny and tighter regulation. That should see prices fall back from their record highs, with the prospect of increased regulation being the most important factor affecting Bitcoin in 2021.

Economics professor Nouriel Roubini – a long-time critic of bitcoin – is blunter, telling Yahoo Finance last week that it was a “hyperbolic bubble” that will go bust.

There is no use. There is no utility. The only thing is a speculative, self-fulfilling kind of rise, and that rise is driven totally by manipulation.

The price of Bitcoin is totally manipulated by a bunch of people, by a bunch of whales. It doesn’t have any fundamental value.

Roubini also argues that central banks are going to introduce digital currencies, which will revolutionise payment systems. More details here.