Powell and Trump Lift 'Digital Gold' Bitcoin Close to the Magical $100,000
Big-cap technology and Bitcoin were the stars of the market show Wednesday.
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Although volume was very light on Wednesday, big-cap technology stocks continued to push higher and covered up mixed breadth of about 5,500 gainers to 3,900 decliners. The Russell 2000 lagged again, and the Magnificent Seven MAGS roared to a new high with a gain of 1.6%.
While dip buyers showed up on midday weakness, the main catalyst was Fed Chair Jerome Powell, who sounded quite optimistic in an interview at the DealBook Summit. He stated that the economy is in very good shape, inflation is coming down, and the Fed is on the path to bring rates to neutral levels. The one slightly hawkish comment that he made was that the Fed could afford to be cautious and does not have to rush to cut rates. Fed Fund futures indicate a 78% chance of a quarter-point cut at the meeting on December 18.
One of Powell's more interesting comments was that he viewed Bitcoin as a form of digital gold. He doesn't view it as competition for the dollar but just another asset class, like precious metals, that people may choose to invest in.
The market cap of gold worldwide is close to $18 trillion, while the current market cap of Bitcoin Is about 10% of that, or $1.8 trillion. Gold is tangible and has practical use as jewelry and some industrial applications, so a big chunk of it isn't held for investment purposes and can't be directly compared. However, if Bitcoin becomes more accepted as an asset class, it would have to rise tenfold to reach the same level as gold.
Powell's comment about Bitcoin being digital gold, along with Trump's nomination of a crypto-friendly head for the SEC, sent Bitcoin to a new high just short of the magical $100,000 level. Bullish sentiment surrounding Bitcoin continues to build as it becomes more mainstream and is viewed as an asset that may deserve some allocation of capital.
On the one hand, the overall market action on Wednesday was quite frothy, but on the other hand, it lacked volume, was a bit narrow, and didn't generate as much small-cap speculation. Big-cap technology and Bitcoin were the stars of the show, but they have become very tough to buy after this recent run. We didn't have an intraday reversal, but I will remain on watch.
Have a good evening. I'll see you Thursday.
At the time of publication, Rev Shark was long IBIT.
