Investor immunity to cryptocurrency 'disease' is growing, says Barclays

Global Stock Markets

The investment mania for cryptocurrencies is like an infectious disease whose transmission rate may be declining, Barclays said on Tuesday, concluding their combined market capitalization has probably already peaked. 

Cryptocurrencies hit a collective value of close to $800 billion in December and January, when prices jumped.

Since then a sharp selloff has left them with a capitalization of around $260 billion, according to Coinmarketcap.com, $115 billion of that being in the biggest and best-known cryptocurrency, bitcoin.

The combined figure was unlikely to climb back beyond a range of $660 billion to $780 billion, the British bank said in an analysis, with any long-term demand for cryptocurrencies coming from “low-trust” sectors of the global economy.

Barclays (BARC.L) based its findings on a model that compared crypto-hysteria to “the spread of an infectious disease” through a population of investors.

The bank divided them into three groups: “Infected individuals, susceptible individuals who are vulnerable but not yet infected and those who are immune,” said Marvin Barth, head of global FX strategy.

“Like infection, transmission is by word-of-mouth, via blogs, news reports and personal anecdotes,” he told journalists. 

The bank said that former cryptocurrency holders were developing “immunity to further investment.”
Critics say digital currencies are little more than a giant Ponzi scheme and regulators have warned investors that all their money is at risk. With prices BTC=BTSP dropping after financial authorities promised a crackdown, several banks and analysts have already called the market a bubble that is now deflating.

Supporters say cryptocurrencies and the technology behind them have the potential to do away with traditional fiat currencies and transform how we store money and pay for goods.

Barclays said that it had reached its market capitalization estimates using generous assumptions of money demand for transactions and wealth storage in “low-trust sectors”

FTSE 100 knocked down to two-week low with Micro Focus plunge

European Stock Markets

A plunge in Micro Focus’ share price on a gloomy revenue outlook sent the UK’s top share index down to a two-week low on Monday, with weakness in commodities-related sectors adding pressure. 

Barclays (BARC.L) jumped around 4 percent after activist investor Sherborne (SIGC.L) acquired 5 percent of voting rights in the bank.

Investors have been putting pressure on Barclays to become a profitable investment banking force. It has struggled due to low volatility and tougher regulations on capital requirements.

The blue-chip FTSE 100 .FTSE index was down 1.2 percent at 7,077.00 points by 1005 GMT as materials and energy stocks fell on the back of weaker metals and oil prices.

Shares in software company Micro Focus (MCRO.L) plummeted 58.5 percent and it was on track for its biggest ever one-day loss after its CEO quit and it cut its revenue outlook.

Micro Focus has had problems stemming from assets it bought from Hewlett Packard Enterprise HPE.N., on which it spent $8.8 billion in 2017.

Micro Focus fell around 17 percent back in January after a disappointing set of results and outlook.

Elsewhere British mid caps .FTMC were down just 0.3 percent, outperforming the broader European market, propped up by a 25 percent jump in Hammerson's (HMSO.L) shares.

Shares in the UK retail landlord rose following news that it had been approached by French shopping centre operator Klepierre (LOIM.PA) earlier in the month.


As Brexit uncertainties continue to weigh on UK stocks, overseas businesses have found cheaper UK companies attractive takeover targets.

Goldman's rotten trading quarter is a familiar smell on Wall Street

Big Wall Street banks have spent billions of dollars and untold man-hours in recent years transforming their trading desks from hedge-fund like operations trading on their own account into market-making businesses offering a price based on what customers want to buy or sell. 

But the shift in business model, prompted by reforms following the 2008 financial crisis, has done little to shield banks from suffering big losses when markets move against them, traders and risk managers told Reuters this week. 

Goldman Sachs Group Inc’s (GS.N) second-quarter results, which saw earnings rise to $3.95 per share from $3.72 in the same quarter last year, also included the worst commodities trading quarter in its history as a public company, prompting a 2.8 percent fall in the bank's stock in the last two days. 

Bad inventory positions based on wrong expectations of customer demand were partly to blame, Chief Financial Officer Marty Chavez said.

Goldman is not alone. In recent years, banks including JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Barclays PLC (BARC.L) and Deutsche Bank AG (DBKGn.DE) have all suffered losses from currency moves, interest rate positions, or misguided bond market bets. 

Under the so-called the Volcker rule, which was intended to limit proprietary trading, banks are now required to prove they are only holding enough inventory to meet "reasonably expected near-term demand." 

The rule was implemented in response to the 2008 financial crisis, when Wall Street banks fueled problems in the mortgage market by making speculative bets with their own money. 

But one of the Volcker rule's unintended consequences has been to drain liquidity in certain markets, which has made it more expensive and difficult for banks to source inventory for clients or manage their own risks. 

New rules defining the amounts of capital banks must hold have made it more expensive for them to hold certain types of assets, while a long period of low volatility in some markets has made it trickier to gauge when trading activity will suddenly rise.

Central bank reserve keeps kiwi rising

The New Zealand dollar was the main mover in an otherwise dormant market in major global currencies on Thursday, up half a percent after the country’s central bank made no clear effort to talk the currency down at a regular policy meeting. 

With European stock markets set to fall for a third day, investors sought the traditional security of the yen, pushing it around 0.3 percent higher against both the euro and the dollar in the first hour of European trade.

Dealers said "short" bets against the kiwi had been squeezed after the central bank sounded several upbeat notes on the outlook for growth and impact of current exchange rates.

A number of banks had been calling for more gains for the kiwi around the meeting, arguing that a 3 percent gain since May still leaves it well undervalued compared to long term measures of fair value and others in the commodities currencies bloc more exposed to falling oil prices.

It was also around 0.4 percent higher against both the Aussie and Canadian dollars - both currencies that tend to be closely dependent on the prices of oil and other major commodities.

After a dip in the past week, however, there was little sign of more pain for the group, despite a fall in Brent crude to less than $45 a barrel overnight. [O/R] The Aussie and the Canadian dollar were both roughly steady against their U.S. counterpart.

In an updated outlook for the year ahead published on Thursday, Barclays called for the kiwi to gain almost 5 percent against the Aussie over the next year.

The central bank of another major oil producers, Norges Bank, makes its own regular statement on policy at 0800 GMT. Its crown currency was 0.1 percent stronger in early trade in Europe.

The dollar index, which measures the greenback against a basket of six major currencies, was roughly flat at 97.54, having retreated from a one-month high of 97.871 set on Tuesday.