Welcome back to the distributed ledger. This is Francis Yu, a reporter for MarketWatch. Fears have spread in financial markets that US lawmakers will not be able to reach an agreement to raise the country’s debt limit by X date, or the date that the US government is unable to pay it. Debt Obligations. JPMorgan Chase & Co. Analysts at JPM, +0.24% said Wednesday they see the odds of debt ceiling negotiators failing to reach a deal by early June at “around 25% and rising.” The US Concerns surrounding technical defaults on government debt have contributed to volatility across the board Financial Markets sent Treasury bills maturing more than 6% in the first eight days of June. The yield on such bills briefly touched 7% on Thursday. As investors seek refuge from such turmoil, gold and bitcoin are often cited as potential safe havens. Still, gold futures have retreated since the most active contract hit its second-highest settlement on record on May 4. Bitcoin, which has rallied nearly 60% so far this year, has also posted a weak performance over the past few weeks, below 5.8. % in last month. Are gold and bitcoin an effective hedge against a technical default on US government debt? Why don’t we see a rally as X date approaches? I reached out to several analysts to ask for their views. Find me @FrancesYue_ on Twitter to share any thoughts on crypto, gold or this newsletter. Is gold a haven? FactSet “Generally speaking, gold thrives when there are periods of uncertainty,” said StoneX Group analyst Rona O’Connell. “But if you take that uncertainty too far, we get to a stage where people are sitting on their hands and not really doing much, and that’s what happened here.” Gold futures for June delivery GC00, +0.06% GCM23, +0.06% fell $20.90, or 1.1%, to $1,943.70 an ounce on the Comex on Thursday, with the most active contract posting its lowest finish since March 21. Factset data. As the price of gold futures dips below $2,000, “I think it argues that the bulls may be a little disappointed,” O’Connell said. But according to O’Connell, gold is “bound to take a pullback” with the premium building over the past few weeks. “The fact that gold has not climbed much higher given the potential severity of the economic consequences should no agreement be reached before the June deadline reflects the prevailing view that markets finally believe some middle ground can be found in time,” Rupert Kinesis. Money analyst Rowling wrote in a recent note. Still, the price of gold remains high at levels not seen many times in history. What about Bitcoin? According to Swan Bitcoin managing director Steven Lubka, given bitcoin’s rally so far this year, it’s “not crazy to see a little pullback.” Bitcoin is up nearly 60% so far this year while remaining more than 60% below its all-time high in 2021. However, if the US defaults on its debt, and “everyone panics, bitcoin could do very well in that scenario,” Lubka said, citing bitcoin’s limited supply, decentralized and non-sovereign properties. Nor, everyone agrees. According to S&P Global Ratings Director Lapo Guadagniolo, there is not enough evidence to support the claim that Bitcoin could serve as a hedge against the debt ceiling crisis. “We can’t make that argument because we don’t see it in the data, ” Guadagniulo said. A rising dollar The recent strength of the U.S. dollar has also weighed on bitcoin and gold. On Thursday, the ICE U.S. Dollar Index DXY, -0.20% , which measures the currency’s strength against a basket of six major rivals, was 17, according to Dow Jones Markets data. climbed above 104, its highest level since March. Although a technical default on US government debt could hurt the dollar’s reputation in the long run, it could have little effect on the immediate reaction, which would be knee-jerk, as my colleague Joseph Adinolfi explains it in detail here. As gold is mostly denominated in US dollars and bitcoin’s main trading pair is dollar-denominated stablecoins, a strong dollar could weigh on both assets. Still, the long-term debt ceiling defeat could strengthen the narrative surrounding bitcoin and gold, as “the management of the world’s fiat system comes into question,” according to Greg Magadini, director of derivatives at Amberdata.Crypto lost bitcoin in the second quarter, according to CoinDesk data, in the past. 2.8% on the week and was trading at around $26,360 on Thursday. Ether fell 0.9% to around $1,805 over the same period
Biggest gainers
Price
%7-day return
marumaruNFT $0.26 201% Render $2.70 19.5% Kava $1.10 14.3% TRON $0.08 10.6% Huobi $3.12 8.4% Source: CoinGecko
The largest decliners
Price
%7-day return
GMX $52.68 -14.6% Sui $0.99 -13.3% Phantom $0.33 -10.1% Stax $0.59 -9.7% Optimism $1.62 -9.7% Source: CoinGecko Must-Read Crypto Payments to Chinese Fentanyl Suppliers (CpWt for more than a year) by Sam Altman above Co-founded raises $115 million (Bloomberg)
