China crackdown, key auctions, bitcoin strong

China

The 2.8 billion dollar fine for Alibaba gave investors some relief that the e-commerce giant was not going to get a forced makeover.  The business model is intact for Alibaba and shares are bouncing back.  It is unclear if this will be a one-time fine but for now investor confidence has not been derailed.

Jack Ma’s Ant Group continues to get bombarded with setbacks.  Ant Group will be subject to tougher regulatory standards now that the PBOC is required to make massive overhauls that will correct unfair competition in its payment business and corporate governance.

China is likely to deliver more regulations to help remove financial risks so fin-tech should be prepared.

Auctions

Treasury yields held onto gains after both the 3-and 10-year auction went well.  The supply is growing and if demand eventually turns anemic, that could be the trigger for the bond market selloff to accelerate.  The 3-year auction was awarded at 0.376% v 0.355% prior and with a bid-to-cover of 2.32 times, which was softer than the 2.45 average for the previous six auctions.

The 10-year Treasury auction had no hiccups and was sold at a high yield of 1.680%, which was only 0.2 basis points above the pre-sale price.

The dollar was modestly lower following both decent auctions.

Crypto

Fed Chair Powell’s 60 Minutes interview on CBS should remind cryptocurrency traders that the US government doesn’t know what they will do regarding regulation.  When asked about the digital dollar, he stated they are evaluating it.  Powell shifted some of the burden on Congress to make the final decision on moving forward with the digital dollar.

In the central bank race to launch a digital currency, China is winning and that is now drawing some scrutiny from the Biden administration.  A successful digital yuan could strengthen China’s currency status, but more importantly for the Biden administration could be seen as a workaround to avoid US sanctions.  The US could try to disrupt the digital yuan and depending on how they do that could be positive for bitcoin.

Despite never-ending regulatory fears, cryptocurrency excitement for the Coinbase and eventual Kraken IPO is driving the entire cryptoverse higher.  Adding to the positive news for cryptocurrencies was the rejection of the SEC’s request for eight years of record of Ripple Labs Inc co-founders.  This was another victory for XRP holders, but more importantly, could set some legal precedent for other cryptocurrencies.

Bitcoin was knocking on the record high door but has since retreated.  The outlook remains bullish and Coinbase excitement that the global crypto market cap could reach USD3 trillion should keep the buzz going for bitcoin this week.

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