Bitcoin
Virtual currencies represented by Bitcoin have seen a huge increase in the past month. So, what are the basic factors that affect Bitcoin pricing?
Inflation-resistant property: Due to the limited issuance of Bitcoin, when the global credit currency is over-issued and flooded, when there is inflation expectation, Bitcoin will rise. And vice versa.
Policy supervision: Since Bitcoin is a super-sovereign currency, countries around the world have adopted a relatively strict regulatory attitude towards Bitcoin. When the regulatory intensity becomes loose, Bitcoin will also rise.
Bitcoin has experienced a Davis double-click in the past period of time: on the one hand, the Fed's interest rate cut has triggered expectations of re-inflation. On the other hand, the new US President Trump and the richest man Musk are both firm supporters of Bitcoin, and Bitcoin may usher in further relaxation of regulations in the United States.
gold
Gold pricing framework: The price of gold depends mainly on three factors
It is anti-inflationary, which is similar to Bitcoin;
The second is the US dollar index. Gold is priced based on the US dollar index. If the US dollar is strong, gold will fall. Currently, many global currencies including the RMB, Japanese yen, and euro have fallen sharply against the US dollar. The US dollar index has hit a new high, causing the prices of gold and other commodities to fall.
The third is risk aversion. There is a saying that "antiques are valuable in prosperous times, and gold is valuable in troubled times". After Trump returned to the White House, he promised to end the Russia-Ukraine conflict and the Middle East conflict as soon as possible, which reduced the safe-haven properties of gold.
Overall, although the current Fed's interest rate cut expectations still support gold prices in the long run, due to the recent strength of the US dollar, many global currencies have fallen against the US dollar, the US dollar index has hit a new high, and the price of gold priced in US dollars has fallen. At the same time, Trump's return to the White House may end the conflict between Russia and Ukraine and the Middle East, which reduces the safe-haven properties of gold and also has a negative impact on gold prices.
USD/RMB
The US dollar has appreciated rapidly against the RMB in the past week, mainly due to the following reasons:
The US economic data performed well: the US job market continued to improve, and retail sales growth exceeded expectations, showing the resilience of the US economy. Good economic data has strengthened investors' confidence in the US economy, attracted capital to flow into the United States, increased demand for the US dollar, and promoted the appreciation of the US dollar.
Monetary policy divergence expectations: There is uncertainty about the Fed's future monetary policy, but the market's expectations for its interest rate hikes have increased. In contrast, central banks in other countries may continue to implement loose monetary policies. This divergence in monetary policies has led to a relatively higher yield on US dollar assets, attracting international capital to flow into US dollar assets and driving the US dollar stronger.
Uncertainty in the global trade situation: Uncertain factors such as international trade frictions still exist. In this unstable environment, investors tend to seek relatively safe assets. As a traditional safe-haven currency, the demand for the US dollar will increase, leading to an increase in the exchange rate.
Strong Dollar vs Weak Dollar
But we know that Trump's own policy agenda is a weak dollar policy. He believes that a strong dollar will hinder the economic and trade development of the United States. His main logic is as follows:
Hindering exports and inhibiting the development of manufacturing
Decreased cost competitiveness: The strong dollar makes American-made goods more expensive in the international market, increasing the cost of purchasing American goods for foreign buyers, resulting in a decrease in the export volume of American goods. This is a huge challenge for American manufacturing companies that rely on exports and is not conducive to the further development and expansion of the manufacturing industry.
Sales conversion reduction: For American manufacturers with factories overseas, due to changes in exchange rates, their sales denominated in foreign currencies will decrease when converted into US dollars, which will in turn affect the company's overall revenue and profits. The decline in corporate profitability may cause it to reduce production and investment overseas, or even withdraw some business back to the United States, but this is not a true manufacturing repatriation, but a helpless move made by companies to cope with exchange rate risks.
2. Favors imports and impacts local manufacturing
Imported goods have greater price advantages: A strong dollar reduces the cost of importing foreign-made goods into the United States, giving foreign manufacturers an advantage in exporting to the United States. American companies and consumers will be more inclined to buy relatively low-priced imported goods, which will have an impact on the domestic manufacturing industry in the United States. The market share of the domestic manufacturing industry may be occupied by imported goods, and the production and operation of enterprises will be affected. Some less competitive domestic manufacturing enterprises may face the risk of bankruptcy or layoffs.
Supply chain dependence on imports: The increase in imported goods may deepen the dependence of the US manufacturing industry on foreign supply chains, which runs counter to the goal of manufacturing reshoring. Companies may neglect the construction and development of local supply chains because of the convenience and low cost of imported goods. In the long run, this is not conducive to the independent development and industrial upgrading of the US manufacturing industry.
3. Influence investment decisions and change industrial layout
Increased attractiveness of overseas investment: The strong dollar increases the purchasing power of the dollar when American companies invest overseas, enabling them to acquire overseas assets or establish production bases overseas at a lower cost. Therefore, some companies may choose to invest overseas instead of investing in manufacturing in the United States, which will hinder the process of manufacturing repatriation. For example, some large American companies may prefer to invest and build factories in emerging economies with lower labor costs and greater market potential to obtain higher returns on investment.
Decreased attractiveness of domestic investment: For foreign investors, a strong dollar will increase their investment costs in the United States, because they need to exchange more of their own currencies for dollars for investment. This will reduce foreign investors' willingness to invest in the U.S. manufacturing industry and reduce the inflow of foreign capital into the U.S. manufacturing industry, thus affecting the capital investment and development of the U.S. manufacturing industry.
However, a strong dollar is not completely unfavorable to the reshoring of US manufacturing. For example, for some US manufacturing companies that need to import raw materials and parts, a strong dollar can reduce their import costs, which to a certain extent helps offset the increase in other costs such as logistics costs. But overall, a strong dollar brings more challenges than opportunities to the reshoring of US manufacturing.
Hong Kong stocks
The Hang Seng Index broke down and fell in the past week. From the perspective of liquidity, this was mainly because the expectations of the Federal Reserve's interest rate hikes increased and global liquidity tightened, which led to the outflow of foreign capital from the Hong Kong stock market, thus putting pressure on stock prices.
Conclusion
I personally think that the probability of the US raising interest rates again is extremely low, and the strong dollar is not conducive to the return of US manufacturing, which is not in line with Trump's policy agenda after he was elected. When the expectation of interest rate cuts rises again, it will be good for assets such as Bitcoin, gold and Hong Kong stocks in the long run. #交易所BTC储备量创2018年以来新低
