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Over the last four years, the European Central Bank has managed to inject 2,600 billion euros into the banking system in order to maintain economic stability.
To be clear, these money injections were one of the only things supporting the economy, and even the Governor of the ECB admitted it.
Now, 2.6 trillion euros may not seem like a lot of money, but we must consider that this money is then multiplied by the fractional reserve banking system with every euro created to be lent several times. So the actual amount of money that entered the system is much higher.
Here we can see the level of M3 money in the eurozone ranging from less than 10 billion euros to more than 12.27 billion euros in just four years.
Yesterday, the ECB announced that they will stop injecting new money into the system. In the United States, they are already starting to extract money allowing the bonds they had bought to expire. In Europe, for the time being they will renew their obligations.
So for those of you who read these daily updates and wonder what the monetary tightening is, that's how it works and is having a huge impact on the markets.
@MatiGreenspan
eToro, senior market analyst
Today's highlights
Poor data in China
USD becoming strong
The Bitcoin Bullcoins are still bullish
Note: all data, figures and graphs are valid from December 24th. All trading involves risks. Only risk capital that you can afford to lose.
Traditional markets
Stocks declined during yesterday's New York session. There were a lot of headlines on a possible government closure, but this is probably not the catalyst for the fall in stocks. Only a distraction from a spectator.
As mentioned earlier, the tightening of monetary policy is the driver here. During most of the year, the stock bulls were able to say that the economy is still doing very well, but unfortunately, they do not even have a leg to lean on.
The US job report last week was sad and GDP in the third quarter was a clip below the national average.
Things did not go much better in the Asian session either. Chinese investors drank their morning coffee by reading titles like this …
To put the numbers in perspective, here is a graph of Chinese industrial production from the crisis.
… and here's one for retail sales. These are the lowest figures in more than a decade. A real shock for economists whose forecasts were already low.
As you can probably imagine, the entire global stock market is in risk-off mode now.
Force USD
In line with the risky mood, it is likely that many traders are moving towards cash. This could be why the US dollar is testing new highs at the moment.
Here is the chart we have drawn and shows a fairly clear upward triangle for the US dollar index. Surely it looks like a breakout model.
Similar to what we saw in August, emerging market currencies are achieving the greatest success. Here we can see the Lira, the Rand and the Weight contract.
At this point, only the Japanese Yen is a larger, but only slightly safe haven.
The bulls make it Bull
To say that I am confident about bitcoin is a euphemism, but also my extreme optimism is obscured by some of the other analysts of the sector.
As much as I respect Mr. Lee and I appreciate his point of view, the title above has raised some alarm bell in my head.
In my personal philosophy, the market is never wrong. Fair value is what someone is willing to pay for it. I can understand how to use the metrics to try to determine what the price of a resource should be useful. However, if nobody is willing to pay that amount, then it is not the correct value.
During the interview, Thomas even tried to try to decode his own calculations showing how, given the current price of bitcoin, there should be far fewer active portfolios. Even this thought seemed a little silly to me.
Of course, I believe that bitcoin can grow in value very quickly. After all, there is an extremely limited supply. But for this to happen, the question must first recover.
Good weekend !!
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