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iTrust Daily Insight

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23rd October
iTrust Daily Insight
Edition 10.23.2019

Oct 23 Mid-Day Market Update — digital currencies down 8-10% today

Dear Reader —

As we are writing to you, at about 11am PT, 2pm ET and 7pm London time, we observe the following:

  • Prices of all the largest market-cap Digital (Crypto) currencies (except stable coins) are all down 8-10% today
  • Futures prices on the CME for Bitcoin for November delivery are down 9% today
  • Oil and copper prices — tied to expected growth — are up 1-2% today
  • Global equity prices are generally unchanged today

As we warned yesterday, the biggest news in the digital currency markets today is in fact the vote in the UK regarding Brexit and the testimony by Facebook CEO Mark Zuckerberg in the US congress today regarding FB’s proposed digital currency Libra.

Clearly, the markets for digital currencies are down sharply today and we can ascertain market participants do NOT like today’s news events — there are more sellers than buyers. That’s why prices are going down.

The UK parliament effectively voted to leave the EU in an orderly fashion — the timing is somewhat in question but the basic outline has been determined; so the risk of disruption and people fleeing fiat currency into digital currencies has been reduced — thus making future purchases of digital (crypto) currencies less likely and therefore less valuable today.

The much more important news, though, is Zuckerberg’s testimony.

It seems the digital (crypto) currency markets do not like what they read and heard.

Facebook stock is actually up 1 1/2% today so the damage seems not only limited to but particularly harsh in the digital currency markets.

We found this good analysis of Zuckerberg’s prepared comments by Forbes:
https://www.forbes.com/sites/michaeldelcastillo/2019/10/23/analysis-of-facebook-ceo-mark-zuckerbergs-cryptocurrency-testimony-before-congressional-hearing/#55adbf2e28c5

It may have come as a surprise to many that China plans to launch its own digital currency with support from its many State-Owned-Enterprises.  Of course, to the extent that other digital currencies are used by folks in China and North Korea to get money out of those capital-controlled countries, any new competition from a China-sponsored digital currency would, by itself, make currently available digital currencies less important and therefore less valuable.

We would hold, though, that if the markets ARE interpreting the news about a new Chinese digital currency in that way, the markets may be getting it wrong: we find it very unlikely that people trying to get money out of China and North Korea would trust a state-sponsored digital currency to avoid capital controls.

To the extent though that the testimony was somehow cantankerous and the prospects¬† for Libra are now lower than they were before today’s testimony, then the prospective lower global liquidity for digital currencies may be a large disappointment for digital currency investors and traders — thus today’s lower prices.

We will seek to learn more information as soon as possible and get back to you with any analysis we think might be helpful.

Very best,
Your iTrust Capital Economics Team

Tim Shaler is Chief Economist of iTrust Capital.  He is a published Real Estate economist, was a portfolio manager and asset allocation expert at his previous firms and is an adjunct professor at Webster University. His MBA (Finance) and MA in Russian Economic History are both from the University of Chicago.

For all media inquiries, please contact Blake Skadron at b.skadron@itrustcapital.com.

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