Commodities Corner: Bitcoin Crashes 16%, Copper Scores Best Month Since 2016

Get Rich or Die Mining?  

Bitcoin, the peer-to-peer decentralized digital currency, is coming off its worst week in almost a year. Investors sold off their riskier assets in the global financial markets amid international bond yields going through the roof. As a result, traders were ditching non-yielding assets in favor of something more solid. Bitcoin exchange-traded funds (ETFs) also recorded substantial launches, flipping negative soon after recording tremendous inflows upon their debut. From Grayscale’s Bitcoin Trust to the Purpose Bitcoin ETF, many of these paper investments slipped below their debut prices.  

One market observer summarized the situation in an interview with Coindesk: “Cash is king in times of distress, not bitcoin.” Denis Vinokourov, head of research at Bequant, told the crypto news publication:

Despite the narrative being sold by crypto maximalists that digital assets are a safe-haven asset, the use of bitcoin suggests it is more of a risk asset. Thus, liquidity events such those witnessed this week in equity markets will subsequently feed into digital assets, even if fundamentally the two are not related.

During last week’s market rout among the leading benchmark indexes, investors were diving into the US dollar, Swiss franc, and Japanese yen. It became so bad for the cryptocurrency that bitcoin traded below its 10-hour and 50-hour averages, highlighting a bearish signal in the virtual currency. Is this a sign that bitcoin prices will suffer monumental losses as they did a few years ago after reaching $19,000? Not quite.  

Earlier this week, one of the reasons the virtual currency crashed was an overheated derivatives market. This forced investors to exit leveraged positions, or they were liquidated from these bets. As bitcoin prices plunged below $50,000, the rest of the stock market plummeted, too.  

The cryptocurrency market took another beating by Bill Gates, Treasury Secretary Janet Yellen, and Charlie Munger’s comments. They all described bitcoin as highly speculative, with these high-profile individuals demanding greater regulation and enforcement.

  • Friday Settlement: -$2,125.00, or 4.33%, to $46,995.00 per coin  
  • Weekly Performance: -15.93%  
  • February Performance: +25.87%  
  • YTD Performance: +60.83%  

What’s Brewing in the Coffee Market?  

The international coffee market might be brewing up a larger-than-expected supply deficit amid renewed demand and potential output disruptions in South America.  

Rabobank, a Dutch financial institution with an immense presence in the agricultural sector, projected that the global coffee industry will likely experience a bigger deficit in the 2021–2022 marketing season than what was initially anticipated. It cited Brazil, one of the world’s largest producers, enduring below-average rainfall.  

This has analysts predicting a global balance supply deficit of 2.6 million 60-kg bags in 2021–2022, more than double the original forecast of 1.1 million bags in December. Brazil’s new crop is being pegged at 56.2 million bags, down from 57.4 million bags in December. Rabobank also estimates that Colombia’s production will slide by 300,000 bags to 14.1 million bags.  

At the same time, the deficit is not greater because global demand is projected to slump by 500,000 bags.  

We trim our 2021/22 production number by just over 2 mln bags – 1.2 mln bags of this drop comes from a downward adjustment in Brazil.  

Net imports in non-producing countries continued to come in weak in Q4 2020.  

  • Friday Settlement: -$0.001, or 0.07%, to $1.374 per pound  
  • Weekly Performance: +6.22%  
  • February Performance: +12.3%  
  • YTD Performance: +7.93%  

Get to the Copper  

Copper prices enjoyed their biggest monthly gain since 2016, soaring nearly 16% in February. As supplies tighten, output slumps, and demand strengthens, the industrial metal is surging. Although copper futures plummeted close to 4% on Friday, they still settled the week with a gain of about 0.9%.  

The red metal is taking its cue from the broader financial markets and economic recovery. Investors are bullish on copper amid anticipated demand in the post-coronavirus economy, especially in China, which accounts for more than half of the world’s copper consumption. Beijing has substantially increased its copper imports as the planet’s second-largest economy restocks its declining inventories.  

According to a new report from the International Copper Study Group (ICSG), preliminary estimates highlight an imbalance of 590,000 metric tons in the refined copper market. DWS Group thinks copper consumption will grow 3% per year, which could accelerate the industrial metal’s value since very few announcements have been regarding new capital spending and increased supply.  

It is also crucial to point out that copper is an important component of renewable energy and alternative fuel technology. With more nations turning to green energy for a diverse array of aspects of the economy, copper’s demand is expected to intensify.  

Could rising interest rates send copper plummeting? Markets have indicated that they fear policy tightening could occur due to rising inflation. But industry observers contend that bullish conditions remain intact for copper to test all-time highs.   

  • Friday Settlement: -$0.1615, or 3.79%, to $4.102 per pound  
  • Weekly Performance: +0.87%  
  • February Performance: +15.86%  
  • YTD Performance: +16.53%  

Bears Take Control of Natural Gas?  

A disappointing week, but a strong February — this is how it was for natural gas prices. The so-called bridge fuel experienced an enormous selloff once investors due to Arctic-like conditions subsiding and domestic supplies not facing intense pressure as bulls initially hoped, despite the US posting the second-largest weekly withdrawal on record 

The latest weather models suggest that March temperatures will be at or slightly above seasonal norms, although there could be brief periods of frigid cold. With the US awash in natural gas, these weather patterns not severe enough to consume the country’s vast natural gas stocks.  

Bespoke Weather Services says that these temperatures point to low demand in the first half of March.  

Given the look of the pattern out of day 15, it looks more likely than not that the warmth continues into the 16- to 20-day period as well, with very little in the way of any cool air source showing up thanks to a Pacific pattern that is quite hostile for cold. This is the pattern type that has dominated the season, save for the previous two weeks which were cold. 

Still, natural gas prices could find a modicum of near-term support on the sector being undersupplied by 4.1 billion cubic feet per day for the next ten weeks. Whether this is offset by easing demand or accelerated by an unexpected blast of winter remains to be seen.  

  • Friday Settlement: +$0.002, or 0.07%, to $2.811 per million British thermal units (btu)  
  • Weekly Performance: -8.79%  
  • February Performance: +9.93%  
  • YTD Performance: +10.84%  

If you have any questions and comments on commodities today, use the form below to reply. 

© AndrewMoran for Commodity News, 2021. | Permalink | No comment |
Published under: Bitcoin, Coffee, Copper, Natural Gas

Via Commodity News

Total Pageviews


PyndanEX - Allocated Industries

Endeavor To Where It Matters! | Economic Calendar by TradingView

ΛPP.IPΛI 🏄 Powered by Surfing Waves!