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Coinbase stock and the YieldMax COIN Option Income Strategy (CONY) ETF will be in the spotlight after Bitcoin surged above the key resistance level at $100,000. CONY was trading at $18 on Wednesday, down by 37% this year, while COIN was at $330, up by 90% this year.

Bitcoin price hits $100,000

The main catalyst for the Coinbase and CONY ETF will be the ongoing Bitcoin price surge as it crossed the important resistance level at $100,000. It then quickly jumped to $103,000, a trend that could continue in the coming months.

Coinbase and other crypto-related companies do well when Bitcoin is in a strong uptrend because of the impact on volumes. Ideally, when Bitcoin rises, other altcoins rise as well. The market cap of all cryptocurrencies has jumped to over $3.8 trillion.

Recent data shows that centralized and decentralized exchanges have seen higher volumes, a move that will benefit Coinbase.

Data by The Block shows that the volume traded in CEX exchanges rose to the highest level this year in November. Coinbase handled over $175 billion in transactions, a big increase from the $62 billion it processed a month earlier.

Most importantly, Coinbase’s Base Blockchain has also become the fourth-biggest chain in the crypto industry. Its 24-hour volume stood at $1.69 billion, while its seven-day volume was $12.2 billion. Base Blockchain has handled almost $50 billion in volume since its inception.

Coinbase is growing

A key challenge for Coinbase is that its business has lost market share to companies like Bybit and Crypto.com.

Still, the most recent results showed that its business was doing well. Its revenue rose to $1.2 billion, while its net income was about $75 million.

The company is also expanding its business in other areas. In addition to transaction revenue, which stood at $572 million last quarter, it has become a large player in the subscription business. Its stablecoin revenue rose to $246 million, while its total subscription and services revenue jumped to $556 million. Its custody business, which houses its ETFs made over$31 million.

Coinbase is also benefiting from its Bitcoin holdings. Data by BitcoinTreasuries shows that the company has 9,480 Bitcoins in its balance sheet. These coins are now worth over $976 million.

Coinbase stock vs CONY ETF

For an investor interested in Coinase, there are two main ways to go about it. They can invest directly in the stock and benefit as it rises. The other option is where they invest in the CONY ETF, which generates dividends.

Coinbase stock is a straightforward way to invest in the company. CONY, on the other hand, uses covered calls to invest in the company. In this, it invests in the stock and then sells call options. A call option gives an investor a right but not the obligation to buy an asset.

After selling the call option, the fund receives a premium, which it distributes to shareholders as a dividend. Data by SeekingAlpha shows that the yield now stands at 124%.

Data shows that the Coinbase stock price has jumped by 134% in the last 12 months, while the CONY ETF has dropped by 30.5%. However, with dividends included, the CONY ETF has had a total return of 94%, still lower than COIN’s 134%.

Therefore, using this data, it makes sense to invest in the 0%-yielding Coinbase than the 125%-yielding CONY ETF. The same is true with other covered call ETF funds like the JPMorgan Equity Premium Income ETF (JEPI) and JPMorgan Nasdaq Equity Premium Income (JEPQ), which often underperform the S&P 500 and Nasdaq 100 indices.

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Stocks

PayPal stock price analysis: Here’s why it could double soon

PayPal stock price has crawled back and jumped to its highest level since November 2022 as its turnaround strategy continued. It was trading at $89.3, up by over 78% from its lowest level in 2023, giving it a market cap of over $85 billion.

PayPal turnaround is continuing

PayPal, one of the best-known tech companies in the US, has been under pressure in the past few years as its growth trajectory faded.

Its main challenge is that the fintech sector has become highly crowded. Its eponymous wallet business is seeing strong competition from the likes of Google and Apple Pay.

At the same time, its unbranded business is seeing robust competition from companies like Affirm, Adyen, and Stripe.

PayPal is also having a hard time adapting to the new normal after its business saw strong growth during the pandemic. At the time, its business added millions of users, which pushed its annual revenue from $17 billion in 2019 to $21 billion in 2020.

There are hopes that PayPal’s turnaround under Alex Chriss is working. The most recent financial results showed that its transaction revenue rose by 6% in the third quarter, helped by Braintree and Venmo.

Total revenue rose to over $7.8 billion, while the transaction margin rose to $3.6 billion. PayPal has also become a highly profitable company, as its non-GAAP EPS rose by 22% to $1.2 in the last quarter.

The company expects its business to do well this quarter, with revenue growing in the low digits.

According to Yahoo Finance, the average revenue guidance for the fourth quarter is $8.27 billion, a 3% increase from the same period last year. Its annual revenue is expected to come in at $31.71 billion, a 6% increase from the last financial year.

The company is then expected to make over $33 billion in 2025, a 5.8% YoY increase. PayPal will likely do much better than this since it has a long track record of beating analysts estimates.

The case for the PYPL stock

There are a few reasons why PayPal stock price has more upside even as it continues to experience single-digit growth rate.

First, the company is fairly valued. It has a forward price-to-earnings ratio of 18.6, which is much lower than the forward S&P 500 multiple of 21. Its valuation metric is also lower than other fintech companies like Visa, Mastercard, and Block. It is also lower than the five-year average of 30.

Second, the company has millions of users, which it can monetize well. Its active accounts rose by 1% in the last quarter to 432 million. This is good progress since the company was shedding customers for several consecutive quarters.

Third, PayPal is still a strong brand that owns some of the best-known companies in the industry. It owns Braintree that handles billions of transactions each month, Venmo and PayPal’s main business.

PayPal stock price forecast

PYPL chart by TradingView

The weekly chart shows that the PYPL share price formed an inverse head and shoulders pattern. It has now moved above the 100-week and 50-week moving averages, a sign that it is gaining attention.

The stock is also approaching the 23.6% Fibonacci Retracement level at $110, which is about 23% above the current level. Also, oscillators like the Relative Strength Index (RSI) and the MACD have continued rising.

Therefore, there are rising odds that the stock will continue rising as bulls target the 50% retracement point at $180, which is about 101% above the current level. A drop below the support at $71 will invalidate the bullish view.

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Stocks

Avoid MicroStrategy stock and buy MSTX and MSTU ETFs instead

MicroStrategy stock price has done well this year, helped by the ongoing Bitcoin price rally. MSTR has jumped by 542% this year, beating the S&P 500 and Nasdaq 100 indices, which are up by less than 30%.

MicroStrategy stock to do well as Bitcoin soars

MicroStrategy shares will likely continue soaring on Thursday now that Bitcoin has cleared the important resistance level at $100,000.

This is notable since the company has continued buying more Bitcoins and adding them to its balance sheet. The company now has over 402,000 coins in its balance sheet worth over $41 billion. And the management hopes to continue buying these coins in the near future. .

MicroStrategy trades at a significant premium since its market cap now stands at $80 billion, a figure that will continue growing in the near term.

There are rising odds that the MSTR stock price will continue thriving now that Bitcoin is rising.

We believe that Bitcoin will continue soaring in the next few years. Besides, it has already jumped from less than zero in 2009 to over $103,000 today. It took about 15 yeas to get to that level.

Historically, assets take less time to move from a key milestone after hitting the initial one. For example, the Dow Jones index rose to $10,000 for the first time in 2010 and then moved to $20,000 in 2017. It then moved to $30,000 in 2021. Therefore, in the same way, Bitcoin will likely jump to $200,000 in a shorter period than it moved from $1 to $100,000.

This price action will benefit MicroStrategy stock because of its large Bitcoin holdings, which the management has pledged to continue holding.

MSTU and MSTX ETFs are better buys

Therefore, if you are bullish on MicroStrategy stock, a better way to go all in is to buy the T-Rex 2X Long MSTR Daily Target ETF (MSTU) or the Defiance Daily Target 2X Long MSTR ETF (MSTX), which have accumulated over $2.5 billion and $1.6 billion.

The MSTU and MSTX ETFs are leveraged funds that seek to provide better returns than MicroStrategy’s shares. Ideally, when the MSTR stock rises by 1% in a day, the two funds will rise by 2%. At the same time, if the stock drops by 1%, the MSTU and MSTX funds drop by 2%.

MSTU and MSTX ETFs aim to mirror other leveraged ETFs that have done well over the years. A good example of this is ProShares UltraPro QQQ ETF (TQQQ), which provides a leveraged exposure to the Nasdaq 100 index.

MSTU vs MSTX vs MSTR

The TQQQ ETF has done much better than the Nasdaq 100 index. It has jumped by 377% in the past five years, while the Invesco QQQ has jumped by 167% in the same period.

MSTU and MSTX ETFs may have a similar performance as long as Bitcoin continues rising. For example, the MicroStrategy stock has risen by 82% in the last 30 days, while the MSTX and MSTU have risen by 150% and 162%

Therefore, if you are long MicroStategy stock, it makes sense to invest in the two funds instead.

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Stocks

Here’s why the Roku stock price could surge by 76%

Roku stock price has bounced back in the past few weeks, reaching a high of $86, its highest level since February. It has jumped by about 38% from its lowest level in November and 71% above the year-to-date low. It remains about 83% from its all-time high.

Roku’s business is still growing

The most recent financial results showed that Roku’s business was doing well. The numbers revealed that the number of streaming households jumped to 85.5 million in the last quarter, up from 75.8 million in the same period last year.

Roku’s streaming hours have also continued rising in the past few months. Its streaming hours rose from 26.7 billion in Q3’23 to 32 billion, a 20% increase.

Its business has continued growing across its platform and devices. Its platform revenue rose by 15% to $908 million, while its devices rose by 23% to $154 million.

Roku’s devices revenue comes from selling its devices, while its platform one comes from its subscription and advertising. Its devices are the streaming player, television and other products.

Analysts expect that Roku’s business will continue doing well. The average revenue estimate for the quarter is $1.14 billion, a 15% increase from the same period last year.

For the year, Roku is expected to make $4.05 billion, a 16.2% annualized increase. It is also expected to make $4.6 billion in 2025, a 13% annualized increase. There are signs that its business will do well even as competition rises.

Roku has a 27% market share in the connected TV business, followed by Samsung, Amazon Fire, Apple TV, LG, and Xiaomi.

Analysts believe that Roku can be a good acquisition target because of the challenges of going it alone. One of the potential tie-up is The Trade Desk, a company that offers advertising solutions. Trade Desk is also working on TV OS, which analysts believe will take years to be more competitive.

In a statement on Wednesday, analysts at Needham noted that data was its most undervalued asset. The analyst also expects that it can become a good takeover asset in 2025.

Analysts believe that the company is highly undervalued as its annual revenue has risen from $1.128 billion in 2019 to over $3.48 billion last year. Its trailing twelve-month revenue was $3.8 billion.

Roku will also become a highly profitable company because of its high-margin approach to marketing. Assuming that its net profit margin rises to 8%, it means that its profit will be about $368 million. Given that it has a market cap of $10 billion, it has a hypothetical P/E ratio of 27.

Roku stock price forecast

ROKU chart by TradingView

The weekly chart shows that the Roku share price formed a slanted double-bottom pattern around the $50 level. It is approaching the important resistance at $108.53, its highest level in December last year.

Roku shares have moved above the 50-week Exponential Moving Average (EMA). The Relative Strength Index (RSI) and the MACD indicators have also pointed upwards in the past few weeks.

The stock has formed an inverse head and shoulders chart pattern. Therefore, the short-term outlook for the stock is bullish, with the next point to watch being at $108.53, its highest level in January. A move above that level will point to more gains, possibly to the 23.6% retracement point at $144.42, which is about 76% above the current level.

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World News

South Korean political unrest jolts Asian stocks, triggers market volatility

Asian markets were rattled on Wednesday following political upheaval in South Korea, where a brief imposition of martial law created uncertainty across financial markets.

The South Korean won saw volatile trading, briefly strengthening on suspected intervention but remaining near its two-year low against the dollar.

Meanwhile, the benchmark KOSPI index dropped nearly 2%, cementing its position as Asia’s worst-performing stock market this year.

The MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.32%, weighed down by a decline in top constituents like Samsung Electronics.

Other Asia-Pacific markets traded mostly lower as investors responded to political developments in South Korea and fresh economic data from the region.

Japan’s Nikkei 225 slipped 0.4%, while the broader Topix index also declined by 0.4%.

In contrast, Hong Kong’s Hang Seng Index edged up 0.1%, bucking the broader regional trend. Mainland China’s CSI 300 dipped 0.2%, reflecting cautious sentiment among investors.

Meanwhile, Australia’s GDP data revealed slower-than-expected economic growth in the third quarter. Persistent inflation and elevated borrowing costs continued to weigh on the economy, dampening investor confidence.

The S&P/ASX 200 in Australia dropped 0.38%, closing the trading session at 8,462.6.

South Korean stocks experienced significant volatility overnight in the US markets as political unrest gripped the world’s 13th-largest economy.

The iShares MSCI South Korea ETF (EWY), which tracks over 90 large and mid-cap South Korean companies, plunged as much as 7% during trading, hitting a 52-week low.

However, the ETF pared losses later in the session, closing down 1.6% after President Yoon announced the lifting of his emergency declaration, following the National Assembly’s vote to overturn his martial law decree.

In contrast, U.S. markets were steadier.

The S&P 500 edged up 0.05%, while the Nasdaq Composite gained 0.4%, with both indexes reaching record highs.

The Dow Jones Industrial Average, however, lagged, slipping nearly 0.2%.

Government intervention to stabilize markets

In response to the turmoil, South Korea’s finance ministry announced readiness to inject “unlimited” liquidity into financial markets.

Reports indicated that the financial regulator had prepared a 10 trillion won ($7.07 billion) stock market stabilization fund.

The finance minister addressed the media early Wednesday, assuring swift measures to prevent prolonged instability.

Charu Chanana, Chief Investment Strategist at Saxo, told news agency Reuters:

Korean authorities are acting decisively to stabilize the market. While the initial shock might push investors toward safer assets, the long-term impact is expected to be contained.

Global impacts and broader market trends

The uncertainty from South Korea added to existing global market jitters, including political unrest in France.

The euro edged lower by 0.11%, trading at $1.04975, as French lawmakers prepared for critical no-confidence votes against Prime Minister Michel Barnier’s coalition.

French bond futures fell 0.13%, while European stock futures slipped 0.14%.

Analysts warned that a collapse of the French government could widen bond yield spreads, further pressuring the euro.

On the macroeconomic front, US markets remain focused on upcoming Federal Reserve cues.

Recent labor market data showed an orderly slowdown, with job openings increasing in October and layoffs seeing their sharpest drop in 18 months.

Markets are pricing in a 72% probability of a 25-basis-point rate cut at the Fed’s next meeting, with more cuts expected in 2024.

Federal Reserve Chair Jerome Powell’s comments on Wednesday will likely shape near-term market sentiment.

Commodities and currency movements

The dollar index rose 0.12% to 106.45, buoyed by safe-haven demand amid global uncertainties.

Gold prices slipped 0.17% to $2,639 as the dollar strengthened.

Oil prices remained stable after a 2% gain on Tuesday, fueled by geopolitical tensions in the Middle East and anticipation of OPEC+ extending supply cuts.

As political tensions in South Korea ease, focus shifts to global central bank policies and geopolitical developments.

Investors will watch closely for signs of stabilization in Asian markets and potential knock-on effects on global financial conditions.

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World News

Can China accept GDP growth below 5%? People’s Daily says yes

China is shifting its focus from rigid GDP growth targets to more sustainable and qualitative economic improvements, according to an editorial in the state-run People’s Daily newspaper.

In a shift from its usual emphasis on achieving specific growth rates, the government indicated that a pace of economic growth below 5% is now acceptable.

This move comes as the world’s second-largest economy grapples with a series of challenges, including a persistent property sector crisis and mounting local government debt.

China’s economy has struggled to gain momentum

Earlier this year, China set a target of “around 5%” GDP growth, but the economy has struggled to gain momentum due to a prolonged downturn in the property sector, which has weighed heavily on broader economic activity.

Alongside this, local governments are burdened with high levels of debt, which has further complicated efforts to stimulate growth.

In response to these challenges, Beijing has implemented a range of stimulus measures since September, although these efforts have yielded only modest results.

Many economists argue that additional policy support is essential to bolster the economy and revive investor confidence.

Concerns have also been heightened by global uncertainties, particularly the ongoing trade tensions with the United States, with US President-elect Donald Trump’s tariff threats seen as a significant impediment to China’s economic recovery.

The People’s Daily editorial emphasizes that China’s economic strategy is now more focused on qualitative growth—improvements in the quality of economic activities and long-term stability—rather than just striving for high quantitative growth figures.

China’s leaders have acknowledged economic recovery will not be easy

The editorial urges against prioritizing speed for the sake of growth, stressing that reckless expansion and indiscriminate project launches could harm the country’s future potential.

It argues that an economy built on sustainable growth is preferable to one that merely seeks short-term gains.

China’s leaders have acknowledged that economic recovery will not be a quick or easy process.

The editorial pointed out that while economic growth is important, the focus should be on creating a stable foundation for long-term prosperity, rather than obsessing over meeting a specific growth number.

The statement also reflects a shift in policy priorities, signaling that a more balanced and cautious approach may be better suited to China’s evolving economic landscape.

The commentary further warned of global economic risks, citing increasing instability in international markets and the possibility of heightened geopolitical tensions.

The editorial subtly referenced US actions, including ongoing efforts to curb Chinese technological advancements and trade practices, which have contributed to a sense of economic uncertainty for China.

Despite the government’s efforts, the editorial also acknowledged that domestic consumption remains weak, and stabilizing investment is proving increasingly difficult.

These factors, coupled with a less-than-solid economic recovery, point to a challenging period ahead for China’s economy.

While China remains committed to steering its economic growth on a more sustainable path, it is clear that the road to recovery may be longer and more complex than originally anticipated.

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World News

Bank of Korea pledges short-term liquidity boost to stabilize FX market amid political turmoil in South Korea

In response to South Korea’s recent political upheaval, the Bank of Korea (BOK) announced on Wednesday its commitment to boost short-term liquidity and stabilize foreign exchange (FX) markets as necessary.

The central bank’s proactive measures follow a dramatic sequence of events, including President Yoon Suk Yeol’s surprise martial law declaration and its swift reversal by the National Assembly.

The Bank of Korea convened an emergency board meeting early Wednesday to assess the financial impact of the turmoil. Following the meeting, the central bank released a statement pledging to inject funds into the market through special loans if required.

“As announced together with the government, we will provide sufficient liquidity for a limited time until the financial and foreign exchange markets stabilize,” the BOK stated.

South Korea’s Finance Minister, Choi Sang-mok, echoed the central bank’s resolve, promising to take coordinated action to calm market volatility.

South Korean financial regulator to deploy $7.07 billion

Local reports from Yonhap News revealed that the country’s financial regulator is prepared to deploy 10 trillion won ($7.07 billion) into a stock market stabilization fund if necessary.

The political chaos began late Tuesday when President Yoon declared martial law and mobilized military forces in response to escalating domestic tensions.

However, within hours, the National Assembly intervened, overturning the declaration and compelling Yoon to rescind the order early Wednesday. The deployed military units have since been withdrawn.

Market analysts remain cautiously optimistic about the financial impact of these events.

“In our view, the negative impact on the economy and financial markets could be short-lived as uncertainties in the political and economic environment could be quickly mitigated through proactive policy responses,” Citi analysts noted in a client report.

The political instability sent shockwaves through global markets, with South Korean stocks experiencing sharp fluctuations on Tuesday.

The iShares MSCI South Korea ETF (EWY), a key index tracking over 90 large and mid-cap South Korean companies, plunged 7% during US trading, hitting a 52-week low. It later pared losses, closing down 1.6% as news of the lifted martial law spread.

This turbulence follows a surprise decision by the Bank of Korea last week to lower its benchmark interest rate by 25 basis points, a move aimed at supporting the economy amid rising inflation and global uncertainty.

The combination of monetary easing and targeted liquidity measures demonstrates the central bank’s readiness to shield South Korea’s financial markets from prolonged instability.

The BOK’s interventions, coupled with government-backed stabilization efforts, aim to restore confidence in South Korea’s economy.

While the short-term volatility has rattled investors, market experts believe that swift policy actions could limit the long-term impact.

With South Korea being a pivotal player in the global semiconductor and technology sectors, the stability of its financial markets will be closely monitored in the coming days.

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Politics

Here are the European stocks that could thrive amid Trump’s tariff impact

As Donald Trump gears up for another term in the White House, his proposed tariffs on imports from China, Mexico, and Canada are set to reshape global trade dynamics.

While Europe may face its own set of US tariffs, the region’s greater concern lies in the ripple effects of trade barriers aimed at China, a major economic partner.

Europe, heavily reliant on seamless global trade, risks substantial economic disruptions.

The tariffs threaten to undermine a continent already grappling with high energy costs, inflationary pressures, and sluggish growth exacerbated by Russia’s ongoing conflict in Ukraine.

However, certain stocks and sectors may still thrive despite broader economic challenges in Europe, especially as the region’s undervalued shares show potential to narrow the gap with their US counterparts, Barron’s reports.

Europe’s vulnerability to trade disruptions

Europe’s economic model depends significantly on exports, with roughly 20% of the European Union and the United Kingdom’s exports heading to the US.

Luxury goods, such as LVMH’s Louis Vuitton handbags, Ferrari cars, and Diageo’s Talisker Scotch whiskey, could face higher costs if tariffs are imposed.

However, analysts note that the impact of tariffs on European goods may be limited.

Much of Europe’s exports are services, which are exempt from tariffs, while several high-profile goods like Volkswagen cars are manufactured in the US and would avoid levies.

Yet, the broader threat to Europe stems from the potential disruption to global supply chains and trade frictions.

As UBS European equity strategist Matthew Gilman highlights, “The knock-on effects of tariffs on global growth and end demand are a significant concern.”

Chinese retaliation could intensify challenges

A major worry for Europe is retaliation by other nations, particularly China, which may divert its exports to other regions, including Europe.

The influx of Chinese goods, as seen with electric vehicles, could increase competition and suppress prices, adding further pressure on European manufacturers.

Martin Todd, a fund manager at Federated Hermes, emphasizes Europe’s sensitivity to developments in China.

“Europe is heavily exposed to Chinese manufacturing and economic trends. Any disruption from tariffs could exacerbate existing challenges,” he noted.

Trump tariffs may bring opportunities for undervalued European markets

UBS’s downgrade of its 2024 forecast for the Euro STOXX 50 index underscores the uncertainty surrounding European equities.

The index has gained only 7% this year, compared to the Dow Jones Industrial Average’s 19% rise, reflecting the continent’s economic headwinds.

However, while Trump’s tariff threats compound existing vulnerabilities, they may also catalyze European markets to adjust and attract contrarian investors.

The undervaluation of European equities could lead to selective opportunities, especially in sectors that are less dependent on global trade.

European shares trade at about 14 times forward earnings, a significant discount to US stocks, which average over 22 times earnings.

Analysts see opportunities in undervalued European stocks compared to their US counterparts.

Stocks that show promise despite tariff challenges

Despite the looming challenges, some European sectors show promise.

Consumer staples: Consumer staples may remain resilient despite tariffs on goods like Scotch, as essentials from companies like Unilever and Nestle will still see demand.

The iShares MSCI Europe Consumer Staples ETF (ESIS) is down 5% this year, underperforming the STOXX Europe 600’s 5.8% gain.

Utilities: The energy transition in Europe remains a strong theme.

Companies like France’s EDF and Germany’s E.ON could benefit from long-term investment in renewable energy infrastructure.

However, falling natural gas prices, potentially from an end to the Russia-Ukraine war, may pose risks to these stocks.

Technology: While European tech hasn’t matched US growth, firms like SAP and Infineon offer solid potential.

Their lower profile compared to Silicon Valley giants makes them appealing for contrarian investors.

Defense: Trump’s rhetoric about reducing US military support for allies could prompt increased defense spending in Europe.

Companies like France’s Thales, Germany’s ThyssenKrupp, and the UK’s BAE Systems stand to gain if nations ramp up military budgets.

These firms have underperformed US defense stocks, offering an opportunity for growth in a more self-reliant Europe.

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Politics

Mexican peso strengthens to 20.4 per dollar amid labor market growth, trade optimism

The Mexican peso strengthened against the US dollar on Tuesday, reaching 20.4 per dollar.

This marks a significant rebound from its recent low of 20.64 on November 26th.

The improvement reflects investor optimism fueled by positive labor market data and a thaw in trade tensions with the United States.

Economists are reassessing their forecasts as Mexico’s economy shows indications of resiliency.

Historic low unemployment fuels peso rally

A key driver of the peso’s resurgence is Mexico’s October unemployment rate, which plummeted to a record low of 2.5%.

This rate is not just the lowest since March, but it also outperformed estimates that unemployment would settle at 2.9%.

Such a large fall boosts confidence in consumer spending and broader economic activity, giving the Bank of Mexico (Banxico) more leeway in its monetary policy.

With the labour market tightening, some argue that the central bank should pursue a more aggressive easing rate while economic indicators remain stable.

The decrease in unemployment should, therefore, encourage increased flexibility in Banxico’s rate-cutting cycle, thereby driving capital inflows and providing the peso with an additional buffer against volatility.

Easing trade tensions with the US

Improved US-Mexico trade relations have also contributed to the peso’s strength.

Positive diplomatic meetings between US President-elect Donald Trump and Mexican President Claudia Sheinbaum have eased concerns about escalating trade conflicts.

Initially, Trump’s proposal of a 25% tariff on immigration and drug trafficking put pressure on the peso, raising fears of a new trade war.

However, following their recent meetings, markets reacted positively, indicating trust in Sheinbaum’s dedication to addressing these thorny problems, with Trump himself describing the engagement as “wonderful.”

This diplomatic rapprochement has significantly improved investor confidence.

The currency rate’s improvement today reflects a positive market sentiment spurred by hopes for further collaboration between the two neighbouring countries.

Challenges remain: weaker peso year-to-date

Despite the peso’s positive bounce, it is important to note that the currency is still almost 20% weaker year to date.

Concerns about increased government expenditure, growing debt levels, and Banxico’s recent easing actions pose substantial risks to the currency’s long-term stability.

Sheinbaum’s administration has attracted criticism for its budgetary policies, which some analysts think could lead to increasing inflationary pressures and complicate the central bank’s monetary environment.

With government debt on the rise, investors remain concerned about how these financial commitments may impact future economic growth. If more spending persists without equal economic growth, the peso may encounter new risks.

A delicate balance

The Mexican peso’s recent rally offers a positive signal amidst a complex economic landscape.

A stronger labour market and lower trade tensions have all contributed to this beneficial development.

However, the peso’s long-term stability hinges on addressing challenges like government spending and debt management.

Investors will continue to monitor both domestic and international developments as they assess the currency’s resilience.

The peso’s future trajectory will depend on successfully navigating these opportunities and challenges.

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Politics

Brazil’s Central Bank pushes for Stablecoin transfer restrictions under new regulation

Brazil’s Central Bank, officially known as Banco Central do Brasil (BCB), took an important step by launching a public consultation that could significantly alter the landscape of bitcoin transactions in the country.

This proposal is especially notable because it intends to prevent the transfer of stablecoins—cryptocurrencies designed to maintain a stable value tied to a fiat currency, such as Tether’s USDT—to self-custody wallets, including popular platforms like MetaMask.

The central bank’s draft regulation clearly states, “The virtual asset service provider is prohibited from transferring foreign currency-denominated virtual assets to a self-custody wallet.”

This specific policy, part of a larger draft regulatory framework, is not an arbitrary proposal; it is now available for public consultation until February 28, 2025.

With this project, the Brazilian government is taking a proactive approach to improving market monitoring, enforcing compliance, and regulating Brazilian capital outflows in a changing financial landscape.

The rationale behind the regulation

The reason behind these proposed laws stems from the Brazilian government’s growing desire to strengthen its control over the foreign exchange market and efficiently oversee the growing prevalence and use of stablecoins within Brazil’s borders.

According to the consultation document and related statements from officials, the move would entail modifying earlier 2022 resolutions addressing providers of virtual asset services (PSAV) functioning in the foreign currency market.

Beyond simply restricting stablecoin transfers, the BCB has ambitious plans to significantly broaden the definition of the foreign exchange market to include a wide range of activities such as payments, sales, custody, and a comprehensive range of cryptocurrency transactions denominated in foreign currencies.

If this regulation is enacted, PSAVs will be required to provide the BCB with detailed and specific information about customer verification processes, transaction values, and a variety of other operational data deemed relevant to maintaining market integrity.

The rising popularity of Stablecoins in Brazil

The growing popularity of stablecoins in Brazil highlights the importance of this regulation proposal.

Stablecoins, which have the potential to maintain a stable value that is tethered to a fiat currency (such as the US dollar), have grown in popularity in comparison to their more volatile cryptocurrency competitors.

The recent entry of USD Coin (USDC) into the Brazilian and Mexican markets via local bank transfers, as revealed by Circle, is a striking example of this emerging trend.

Circle has clearly stated that their stablecoin can now function flawlessly within the real-time payment systems developed in both countries, allowing for faster, more efficient, and more secure transactions for consumers seeking dependability in their digital transactions.

The challenge of self-custody wallets

In today’s cryptocurrency world, all transactions involving digital assets are subject to severe identity verification methods under the Know Your Customer (KYC) laws imposed by centralized exchanges to combat illicit financial activity.

Self-custody wallets, on the other hand, offer an intriguing and contrasting scenario.

These wallets provide a high level of privacy and user control, allowing individuals to manage their digital assets autonomously and without having to divulge personal information for payment transfers.

This distinguishing feature of self-custody wallets is important in light of the BCB’s ongoing public consultation.

While many see these wallets as an expression of financial freedom because they allow users to have complete control over their digital assets without the need for intermediaries, others argue that they represent a significant regulatory gap that could become a conduit for illicit financial activities, thwarting government oversight efforts.

Reflection on global regulatory trends

The BCB’s proposal is not isolated; rather, it represents a broader worldwide trend toward tighter cryptocurrency regulation, with a particular emphasis on the implications of these digital assets for domestic economies and foreign commerce.

As one of Latin America’s most dynamic and rapidly evolving markets, Brazil is now working to align its cryptocurrency policies with evolving global standards, indicating a growing commitment by financial authorities to ensure market stability while adapting to the ongoing wave of digital transformation affecting financial services.

As the consultation period unfolds, stakeholders—including individual crypto users, service providers, investors, and regulatory bodies—continue to pay close attention to the possible consequences of these proposed changes for the future of cryptocurrency transactions in Brazil.

The eventual outcome could set a key precedent for how nations in the region address the multifaceted challenges and tremendous opportunities presented by the burgeoning cryptocurrency landscape, especially as Brazil positions itself at the forefront of this critical and ongoing conversation about cryptocurrency and regulation.

Brazil’s cryptocurrency transactions at a crucial crossroads

As the Brazilian Central Bank prepares to reinterpret the legislative framework governing stablecoins and the use of self-custody wallets, the future trajectory of cryptocurrency transactions in Brazil reaches a critical crossroads.

As the public consultations progress, the delicate interplay between financial innovation and regulatory control will be widely monitored, not only in Brazil but also throughout the world, as other countries examine and potentially respond to Brazil’s regulatory strategy.

The decisions made today may influence the contours of the cryptocurrency market for years to come, influencing how digital currencies are managed, understood, and used in the broader economic landscape, both in Brazil and elsewhere.

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