May 2021 proved eventful: the total cryptocurrency market capitalisation fell by 20%, while the price of gold rose by 11%.
Currency.com analyst Mikhail Karhalev explained who sold Bitcoin at the end of May, which stocks may rise in June and what traders should expect from the upcoming OPEC+ meeting.
Cryptocurrencies
During the current downcycle, the cryptocurrency market has bottomed. Bitcoin bounced off the $30,000 support level, and Ethereum off $1,800. The signs that the bear trend is ending include rising over-the-counter volumes and the large outflows of cryptocurrency from exchanges by the end of May.
Large players are likely using the pullback to buy Bitcoin and altcoins cheaply. According to the analytics service Glassnode, the selling is being done only by short-term traders and small investors.
During earlier bull markets, similar corrections of 20–50% from peaks occurred. May’s price decline does not mean the current upcycle has ended. Cryptocurrencies remain an attractive investment backdrop amid ultra-loose monetary policy in leading economies.
In recent months there have been reports of new US stimulus packages. The influx of money would positively affect prices of risk assets, including cryptocurrencies. It remains to be seen whether the crypto community forgets negative news from China and the US and starts buying cryptocurrencies.
Stocks
Market participants fear the bursting of a stock-market bubble: the S&P 500 and the Dow Jones Industrial Average have risen since April 2020 with no meaningful corrections. Formally, there is no bubble. Stocks rise because the Fed is printing money and pumping it into the economy. Moreover, thanks to stimulus measures, people buy goods and boost company profits.
Some investors fear a crash and avoid investing in large technology companies. They buy shares of companies that produce scarce goods such as semiconductors: Micron, Lam Research and Taiwan Semiconductor Manufacturing.
Also, shares of companies that mine platinum, palladium and rare earth metals look promising. There is demand for their products in the green-energy sector, particularly among producers of Li-Ion batteries for electric vehicles. These include «Norilsk Nickel», Anglo Platinum Group and Stillwater Mining Company.
Less risky investment is shares of gold-mining companies. Investors often buy gold to hedge against inflation. If the Fed keeps printing money, shares of gold miners such as Barrick Gold and «Polyus Gold» could rise.
Commodities
On July 1, OPEC+ members will discuss increasing production. If the meeting yields a positive outcome, oil prices could fall. However, investors are confident the market will absorb the additional supply and oil prices will not move much. If countries fail to agree on a production increase, the price of WTI oil could rise to around $72.50.
China is the world’s largest consumer of copper. The Chinese manufacturing index continues to rise, implying that the country will buy more copper and push its price higher.
Weak US unemployment data, stimulus and inflation could temper the dollar somewhat. Consequently, copper priced in dollars could rise.
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