Remdesivir Encourages Risk Appetite

After some recent choppy waters, the price of Bitcoin has once again broke out. People talk about the upcoming halving, but this isn’t necessarily a compelling reason just on its own when taking into account the flood of liquidity that has hit the markets and the FOMO that has seemingly hit traders. Also to take into account is the recent positive results in clinical trials of the remdevisir drug by US-based pharmaceutical company, Gilead Sciences, driving the price of almost everything higher, from crude oil, stock markets to cryptos.

US officials have revealed that early results of a trial of the drug have shown “clear-cut” evidence that it can help people recover from the coronavirus. It is tentatively good news, but it should be remembered that trial results depend on test patient groups. From the initial results disclosed, remdesivir might well be useful, but it doesn’t seem to be an ultimate cure.

However, President Trump is in desperate need of some good news in order to relaunch the economy ahead of the November presidential election, and it would seem that he gets this now, at least on the psychological level.  This optimistic mindset has driven up prices of almost all risky assets, including cryptos. Yes, we think Bitcoin is a risky asset, a proxy of global liquidity, and at least for now, is not a safe haven yet. Bitcoin rose by almost 20% in 24 hours from $7,500 to $9,000, but gold fell slightly. The BTC/Gold price ratio is standing above 5 now.

The surge was not a solo dance by Bitcoin, altcoins also played very important roles. While we are currently bullish on ETH, EOS the laggard, rose almost in line with ETH, implying across-the-board bull market sentiments.  ETH outperformed BTC before the news of remdesivir, but it suddenly underperformed afterwards. ETH/BTC is trading at the key historical support level. Sustainable trading above the support level will strengthen market beliefs on ETH/BTC.

The US market is progressively pricing in easing of the lockdowns and subsequent economic recovery, as some states are starting to gradually do so. The WTI crude oil curve also echoes the same views as the long end is significantly higher than the front end. There have been market concerns about the near-term demand due to economic lockdown, but a recovery is expected in the coming months. The curve is in fact much more flattened than what we see in the chart, as the front-end price jumped after the news of remdesivir.

Fed has maintained its target rate range at 0-0.25%, which is in line with market expectations. Some former Fed officials are talking about a possible negative benchmark rate. But according to market watchers,  it will not be any time soon.  Rates futures imply there will be no changes for the next 12 months.

We doubt whether Bitcoin can continue the rally with this kind of pace. After all, Remdesivir probably won’t be a coronavirus cure. After the big rally today (Apr 30), profit taking has already been emerging. Let’s wait and see what happens next.