eToro Market Update: Moral Hazard

Avatar Guest Author 6 months ago

Hi Everyone,

Let’s start off by saying that Facebook’s new Libra coin (under the current proposal) should not be called a stablecoin.

A stable coin is one that’s pegged to a specific currency, or other assets, in order to reduce volatility and therefore the exchange rate remains similar to that of the asset it is pegged to. What Libra is proposing is actually a new currency with a floating exchange rate.

In fact, the Libra is set to act more like an asset-backed ETF, only with a small twist. Libra holders won’t get the profits.

According to the Libra White paper, the Libra Association in Switzerland will be responsible for managing the assets that back the new currency and will receive all the yield from the incoming investments.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

This structure creates a moral hazard for the association members who will be incentivized to seek the maximum yield at any cost.

Last Friday, I alluded to this concept on Twitter just to check the reaction. After seeing this article in the Wall Street Journal yesterday, it seems my fears have been confirmed.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

Let’s hope that they reconsider this plan before launching the product.

@MatiGreenspan – eToro, Senior Market Analyst

Today’s Highlights

  • Rate Cut City
  • Markets are Trending
  • Crypto Contest – Win a Prize

Please note: All data, figures & graphs are valid as of June 25th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Ever since it became clear that the Fed and other central Banks are going along with calls from the market and calls from politicians to ease up on monetary policy, we’ve been in a bit of a different market.

This chart shows the market expectations for US interest rates by the end of the year. Take a look at the black line, which signals three cuts by the December meeting.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

You’ll notice a sharp rise at the beginning of June. It is a sudden shift but overall traders remain complacent and volatility remains subdued. That’s not to say markets aren’t trending, because they certainly are.

What are the trends?

Gold is going nuts, now at its highest levels since the crash in 2013.

The Dow Jones is happy and nearing its all-time highest levels.

Crude Oil is ok. But with all the OPEC and Iran stuff it’s difficult to tell.

Of course, the underlying factor here is the weaker US Dollar.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

Not that we can prove any causation but we can certainly see bitcoin correlating with the rest of the market within this timeframe and acting like any other asset that trades against the buck.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

Today we’ll hear what may prove to be a key speech from Fed Chair Jerome Powell. It will be interesting to see how he explains the sudden dovish turn, given that the US economy grew 3.1% in the first quarter and unemployment is near the lowest levels in 50 years.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

Crypto Contest – Win a Prize

Crypto markets are clearly still excited today as volumes remain elevated. In our weekly interview with CoinTelegraph, we spoke about all the market drivers that brought us over $10,000 and what it might take to bring us back to the all-time high.

market, trading, cryptocurrency, bitcoin, ethereum, libra, facebook, US

We also did a short term technical analysis and took a look at where it might land in the event of a pullback, but my chance of predicting these things isn’t any better than yours.

All you need to do is guess what the price of bitcoin will be on Monday, July 1st. The most accurate answer wins a prize.

Watch the video and leave your comment below. What are you waiting for? Do it now!!

Click this link to play:

Have an excellent day!!

About the Author: Mati Greenspan is a Senior Market Analyst at eToro

Connect with Mati on….

Office Phone: +44-203-1500308 (ext:311)

Disclaimer: The opinions expressed in this article do not represent the views of NewsBTC 
or any of its team members. NewsBTC is neither responsible nor liable for the accuracy of 
any of the information supplied in Sponsored Stories/Press Releases such as this one.
BitStarz Player Lands $2,459,124 Record Win! Could you be next big winner?

Instant Crypto Credit Lines™ from only 5.9% APR - unlock your crypto-wealth tax-efficiently, without selling it. Earn up to 8% interest per year on your Stablecoins, USD, EUR & GBP. $100 million custodial insurance.

Show comments