Bitcoin explodes, US dollar pulls back

Bitcoin approaching record highs

An eventful few weeks saw the dollar briefly come back into favour as vaccine news invited the prospect of a W-shaped recovery. Traders flirted with the idea that all may be good from next spring but that enthusiasm appears to have faded and the dollar and yields have corrected themselves a little.

Improved risk appetite has also been good for those currencies that have struggled at the low points of the pandemic and that have been more associated with periods of optimism. With London and Brussels seemingly closing in on a Brexit deal, the pound and euro are doing quite well and eyeing the summer highs against the greenback.

It’s actually in the crypto space where the big moves are happening. Bitcoin has exploded again this week after holding above $16,00 for a few days, only to rally another 15%, falling just shy of its all-time highs of almost three years ago. It’s surely only a matter of time until a new high is achieved. However, there is something about the immense gains of the last month that make me a little nervous, given past experience.

It has been a frantic few weeks for the markets. More vaccine news, the first rollout, the winter Covid surge, central bank bazookas, Brexit and the tumultuous US election. The presidential transition, normally a smooth and dull affair, could end up being the best show in D.C., and a market-mover as well. Donald Trump is not leaving the White House without a fight, nor is he likely to accept the role of lame-duck President. If he’s going to leave, he’s not going to go quietly. With no shortage of risks in the final six weeks of 2020, investors can expect the markets to remain busy.

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