Analysis of Jefferies, a well-known Wall Street investment bank: US dollar interest rates, gold and Bitcoin markets in the post-epidemic era


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Analysis of Jefferies, a well-known Wall Street investment bank: US dollar interest rates, gold and Bitcoin markets in the post-epidemic era

If 2020 is the year of the “new crown epidemic”, it is actually the “year of Bitcoin” because in this year, Bitcoin has become more and more mature.

Jeffery Group, a well-known Wall Street investment bank, stated in the weekly investment report “Fear & Greed” that Bitcoin’s price performance this year is impressive. Bitcoin is currently up 474% from its low price in March this year, and the year-to-date increase has reached 214. %. On December 16, 2020, the price of Bitcoin exceeded $20,000, and the single-day increase even reached 9.2%. For investment institutions and well-known investors, Bitcoin has become an “investable” investment target this year, and they have all publicized that they have purchased Bitcoin. Therefore, Bitcoin has now basically become part of the financial system, and retail investors also have the opportunity to buy Bitcoin through some investment tools, such as the Grayscale Bitcoin Trust Fund in the United States and the VanEck Vectors Bitcoin transaction recently launched on the Frankfurt Exchange. The notes traded.

It is very important for institutional investors to enter the market. Before these institutional investors arrive, there are many risks in the cryptocurrency market, and some Bitcoin accounts may be hacked. In addition, regulatory risks have always existed. If there are no institutional investors entering the market, Bitcoin is likely to be considered illegal by the regulatory agencies, because before this Bitcoin was mainly used in certain illegal activities, such as trading illegal narcotics on the dark web. . But now, people have discovered that the Bitcoin industry has been different-although this change has occurred more than four months ago. In mid-August and September this year, MicroStrategy, a Nasdaq-listed business intelligence software company, announced that it had invested 425 million US dollars to buy Bitcoin, of which 250 million US dollars were invested in August and 175 million US dollars were invested in September. According to the 8-K application form officially submitted by MicroStrategy to the U.S. Securities and Exchange Commission (SEC), it is disclosed that the purpose of their investment in Bitcoin is because they are optimistic about the fundamentals of Bitcoin’s continuous improvement, and like cash and other short-term investments, it will Bitcoin as a major reserve asset. It is worth mentioning that MicroStrategy invested another US$50 million in bitcoin purchases in early December, and the company currently holds a total of 40,824 bitcoins.

Just after the audit unit and the US Securities and Exchange Commission approved MicroStrategy to include Bitcoin on its balance sheet, the cryptocurrency market sentiment has changed significantly. There is no doubt that the “Fear & Greed” Investment Weekly analyzed this event as a watershed between MicroStrategy’s strategic transformation and the rise of the cryptocurrency market. Soon after MicroStrategy publicly invested in Bitcoin, the payment company Square also announced in October that it would invest $50 million in the purchase of Bitcoin, which accounted for 1% of the company’s total assets. In fact, Square’s investment in Bitcoin is not large, and may not even need to be reported publicly, but in today’s market environment, especially after MicroStrategy enters the market, this is definitely not the case.

I believe that many people have never thought that MicroStrategy will enter the cryptocurrency market. As a traditional smart business company, they have been in the field of technology and software for 31 years. Since the announcement of the investment in Bitcoin, the market value of MicroStrategy has increased by 131% to US$2.77 billion, and the value of their previous investment in Bitcoin has almost doubled, and is currently approximately US$917 million. Since going public in 1998, MicroStrategy co-founder Michael Saylor has been serving as the company’s chief executive officer. In the past 22 years, he has never been a “quick money” operator , So the choice to invest in Bitcoin this time should be his deliberate decision.

The most surprising thing is that Michael Thaler didn’t pay attention to Bitcoin until 2019. At the beginning of 2020, the new crown virus outbreak broke out, and then the Federal Reserve adopted an extreme monetary policy, so he decided to invest part of the company’s funds in Bitcoin this spring and use it as a store of value. Michael Thaler then persuaded the auditors and lawyers, and in the end the auditors approved MicroStrategy to invest in Bitcoin in only ten weeks.

Michael Thaler believes that Bitcoin is a very ideal reserve asset class, but for those who hold gold, I believe that their feeling is the same as the analysis of “Fear & Greed” Investment Weekly, that these people have felt it Bitcoin is beginning to undermine the value proposition of gold. In fact, Bitcoin is “de-golden”. “Fear & Greed” Investment Weekly believes that Bitcoin does have certain advantages. From the perspective of ownership, Bitcoin and gold are not mutually exclusive, and attract investors from different generations such as baby boomers and millennials. If you are a believer in gold, you may need to face up to the actual risks posed by safe-haven assets. You will find that most of the G7 countries have implemented monetary quantitative easing policies, which means that their legal currencies are at risk of devaluation, and in the past they have been safe-haven. Assets can hedge against such risks, but now the “risk-off” attribute is being transferred to Bitcoin. In fact, this transfer process has already begun. There is also a cruel fact. The United States has actually initiated monetary quantitative easing since the 2008 financial crisis. If calculated from then, Bitcoin has performed 177,000 times more than gold. In addition, Bitcoin is a quantitative deflationary asset, that is, the supply is fixed at 21 million, and the circulation is gradually reduced over time, which is also completely different from gold.

It should be noted that the “Fear & Greed” investment weekly report does not recommend investors to completely abandon gold. Frankly speaking, gold has not been completely abandoned by investors. If the new crown virus epidemic eases and the Fed decides not to implement quantitative easing, the market will experience a cyclical recovery, which means that the price of gold will rise again. But for now, you will find that institutional investors are actually holding Bitcoin in various “acceptable” ways. Chris Wood, the global equity strategy director of Jefferies Group, a well-known Wall Street investment bank, suggested as early as June 2019 Investors can hold Bitcoin. He revealed that 50% of Jefferies’ investment portfolios had previously chosen physical gold, but this situation will change in the next few years, and it is expected that gold investment will gradually decrease Five percentage points, after which he will use the funds originally invested in gold to invest in Bitcoin. If the Bitcoin price drops sharply after breaking through the $20,000 level, institutional investors should actually seize this opportunity to continue to increase their Bitcoin positions.

In addition, for the “Fear & Greed” investment weekly report, there is actually no reason to apologize to investors in recommending whether to invest in gold, because the Jefferies Group’s related investment portfolio was created in the third quarter of 2002 when the price of gold was at that time. Bit 323 US dollars / ounce. Of course, if you didn’t choose to invest in gold at that time, you don’t have to feel sorry for yourself at that time.

Let us return to the Federal Reserve. According to the information disclosed at the latest meeting of the Federal Open Market Committee (FOMC) of the Federal Reserve, since the new crown virus vaccine has been approved for listing, the market may enter a recovery state in the future, but it is expected that only 2 will be achieved by 2023. % Inflation target, and most Fed governors believe that short-term low interest rates will be maintained for at least three years, at least three years.

“Fear & Greed” Investment Weekly raised an important question, namely: So far, for the financial market in 2021, there will be signs of cyclical recovery. If the new crown virus epidemic is effectively controlled, the previously suppressed demand may be Is released, how will the Fed respond this time? “Fear & Greed” investment weekly analysis, if it is just because the financial system cannot withstand higher interest rates, the moderate Fed may still maintain low interest rates. According to an article published by the Wall Street Journal on December 17, “The Federal Reserve is Open to Strengthening Stimulus Measures, Will Be Open-Ended to Spur Recovery” (Fed Reinforces Stimulus Will Be Open-Ended to Spur Recovery), “Fear & Greed” Investment Weekly I feel that although interest rate cuts of any degree will not cause severe market volatility, they will at least cause slight fluctuations. Investors all over the world need to understand this.