Bitcoin has been the talk of the town lately, as volumes spiked and prices surged in anticipation of the CBOE futures contract. Altcoins also rose sharply before reversing course later in the week.
Stocks also rose this week, with Wall Street returning to record territory. Meanwhile, the U.S. dollar index also put up strong gains on upbeat domestic data and uncertainty overseas.
Bitcoin’s Earth-Shattering Volumes
BTC/USD went through the roof this week, as prices crossed $19,500 in an incredible show of strength. At its peak, the world’s no. 1 cryptocurrency was valued at roughly $310 billion.
By the end of the week, bitcoin was trading at roughly $16,000 for a five-day gain of $5,000.
Bitcoin’s 24-hour transaction volumes reached a staggering $29 billion Thursday, a five-fold increase over month-ago levels. On Friday, daily volumes reached $21 billion, with BitMEX, Bithumb and Bitfinex accounting for more than a third of the turnover.
Altcoins also surged this week, bringing the total market cap to $452 billion. The global cryptocurrency market shed $50 billion on Friday in a broad correction before prices stabilized within $10 billion of the record high.
CBOE Announces Bitcoin Futures Launch Date
Underpinning the latest rally in cryptos was CBOE’s surprise announcement that it will begin offering bitcoin futures this Sunday. The new contract, which will be traded under the ticker symbol “XBT,” will be offered free through December.
“Given the unprecedented interest in bitcoin, it’s vital we provide clients the trading tools to help them express their views and hedge their exposure,” CBOE chairman and CEO Ed Tilly said.
By launching its derivatives contract Sunday, CBOE becomes the first major exchange to venture into bitcoin. CME Group is expected to launch its own bitcoin futures contract Dec. 18.
Stocks Return to Record Territory
Stocks returned to record highs this week, with the S&P 500 Index gaining 0.6% to close at 2,651.50. Ten of 11 sectors contributed to the rally, with telecom, healthcare and energy leading the way higher. Energy experienced a broad retreat earlier in the week along with information technology stocks.
The Dow Jones Industrial Average added 117.68 points, or 0.5%, to close at 24,329.16 on Friday. Meanwhile, the technology-heavy Nasdaq Composite Index gained 0.4% to 6,840.08.
A measure of 30-day volatility known as the CBOE VIX declined for four straight days on Friday to close at its lowest level in over a month. The so-called “fear index” settled at 9.58 on Friday, on a scale of 1-100 where 20 represents the historic mean.
European equity markets also rallied Friday after Britain and the European Union announced a breakthrough in Brexit negotiations, paving the way for future trade talks. The Eurozone blue-chip Stoxx 50 Pr climbed 1.8% for the week to end at its highest level since Nov. 29.
Japanese stocks finished a volatile week on a high note, with the Nikkei 225 adding 2.9% over a two-day period. The benchmark gauge plunged through the first half of the week.
Tax Reform on the Horizon
The Trump administration is moving closer to implementing its long-awaited tax plan after Senate Republicans passed a sweeping overhaul of the legislation earlier this month. The president now believes Congress will come together quickly to reconcile differences in time for Christmas. Trump has stated that the new plan will come into effect Jan. 1, 2018 if Republicans can iron out differences between two versions of the bill.
Analysts say that the new tax provisions would be retroactive in the event that a deal is reached in the new year.
Dollar Hits Its Stride
The U.S. dollar wrapped up its best week of the year, as upbeat economic data and expectations of higher interest rates drove the world’s most active currency higher. The U.S. dollar index (DXY), which tracks the greenback’s performance against a basket of six peers, rose 1.1% this week to close at 93.90.
U.S. employers added 228,000 workers to payrolls last month, following a downwardly revised gain of 244,000 in October, the Labor Department reported Friday. Analysts in a median estimate called for a November increase of 198,000. The jobless rate held steady at 4.1% on month, while average hourly earnings rose at a smaller than expected 2.5% annual rate.
The Week Ahead
The Federal Reserve’s policy board will hold its final meeting of the year next week. Policymakers are widely expected to raise interest rates for a third time this year, according to the CME Group’s FedWatch tool. The rate announcement will be accompanied by a quarterly summary of economic projections covering GDP, unemployment and inflation.
Federal Open Market Committee (FOMC) members will coalesce in Washington on Tuesday, with the official rate announcement scheduled for the following Wednesday afternoon.
Global data flows will also make headlines next week, including reports from China and the United States.
In other policy news, the Bank of England, European Central Bank and Swiss National Bank will each deliver interest rate verdicts. No change on either front is expected.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.
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