foxex: Facebook, Cryptocurrencies and the British Pound Captivate Wall Street

Chart Advisor | Focus on the Price

Friday, June 14, 2019

1. Facebook Riding the Cryptocurrency Wave

2. S&P 500 Continues Consolidation

3. British Pound Slides on Renewed "Brexit" Fears

Major Moves

Facebook (FB) finally broke above down-trending resistance and was one of the top performing stocks in the S&P 500 today but not for the reasons you might think. The company didn't come up with a new advertising revenue initiative or a plan to combat misinformation. It announced impressive corporate backing for its new cryptocurrency: Libra.

Libra is a digital coin that FB plans to offer its users to make purchases on not only Facebook but across the Internet.

FB hopes to avoid some of the volatility pitfalls that have plagued other cryptocurrencies by pegging Libra's value to a basket of government-issued currencies.

Today, FB announced that Visa (V), Matercard (MA), PayPal (PYPL), Uber (UBER) and others have all signed on to invest approximately $10 million each to back Libra and help bring it to market.

The fact that FB has garnered such strong support from other heavyweights in the online payment and transaction industry has traders excited about the prospect of an increasing number of payment transactions occurring, and being monetized, on the Facebook platform.

This could provide an additional source of revenue from FB's billions of users and help grow the company's earnings per share (EPS).

FB is expected to officially introduce Libra next week.

This is all happening as the value of Bitcoin – and by extension bitcoin-related funds like Grayscale Bitcoin Trust (GBTC) – and other cryptocurrencies are starting to rise once more.

Bitcoin is worth $8,431.98 at the time of this writing, which is more than double what it was worth on April 1.

It's going to be interesting to see if an increasing number of traders turn to Bitcoin, Libra and other cryptocurrencies when the U.S. stock market eventually rolls over, or if they will stick with classical safe-haven assets like gold, U.S. Treasuries and the Swiss franc.

S&P 500

The S&P 500 barely moved this week.

The index opened the week at 2,885.83 and closed the week barely one point higher at 2,886.98

Trading volume is also drying up.

So far in June, an average of 6,905,412,114 shares have traded hands each day on Wall Street. Today, only 4,905,018,474 traded hands. That's a decrease of 29%.

I don't anticipate this lack of volatility or trading volume is going to last for too long. We're bound to get a surprise soon – maybe involving the Federal Open Market Committee (FOMC) monetary policy meeting next week on June 18-19.

Read more:

Understanding Cryptocurrency ETFs

A Cryptocurrency Derivatives Boom Might Be On Its Way

The Black Swan Risk In Cryptocurrency Markets

Risk Indicators - British Pound

The British pound (GBP) tumbled today as initial voting confirmed that Boris Johnson is gaining support among the conservative Tory party to become Britain's next prime minister, now that Theresa May has stepped down.

In this first round of voting, Johnson secured 114 votes from conservative members of Parliament – 71 votes more than his closest competitor, Jeremy Hunt. This moves Johnson on to the next round of voting that is scheduled for June 18th.

Johnson is a former foreign secretary who is advocating a "no-deal Brexit" – meaning the United Kingdom would withdraw from the European Union (EU) without negotiating new trades deals.

The prospect of a "no-deal Brexit" has analysts worried the British economy could stumble into recession, and currency traders are pushing the value of the GBP down in response.

Individual traders can easily track and invest in the GBP through the Invesco CurrencyShares® British Pound Sterling Trust (FXB).

FXB dropped back down to support at $122 – which indicates that £1 = $1.22 – matching the lowest level the currency has reached in 2019. FXB was slightly lower than this in late-2018, but the GBP may be setting up to drop to new 52-week lows.

If the British economy does come under increasing economic pressure the closer we get to the current October 31st deadline for British and EU leaders to reach an agreement, look for the bearish ripple effects to make their way across the pond to the United States.

The Key Players in Brexit

Is the Brexit Risk Fading?