Indian equity benchmarks, BSE Sensex and NSE Nifty 50 tanked at the opening bell on Thursday on weak global cues due to rising tensions in the Middle East.
Indian markets resumed trading after a break on account of Gandhi Jayanti on Wednesday.
Late on Tuesday, Iran fired ballistic missiles towards Israel in retaliation to the latter’s killing of a prominent Hezbollah leader last week.
This spooked financial markets with international equity benchmarks also taking a hit.
As of 10:20 AM IST, the Sensex was at 83368.96, down 1.1%, while the Nifty 50 was at 25,536.60, also down 1.0% from Tuesday’s close.
Shares of downstream oil marketing companies drop
Shares of downstream oil marketing companies fell at the opening on Thursday as higher crude oil weighed on sentiments.
Higher oil prices tend to eat into profitability of downstream oil companies as they have to import crude to refine it into petroleum products.
Shares of Bharat Petroleum Corporation tanked more than 3%, while Hindustan Petroleum Corporation was down almost 4% from the previous close.
Indian Oil Corporation’s stock fell 1.9% on Thursday.
Oil prices have continued to rise since Tuesday as increased tensions in the Middle East put supply from the region at risk.
Most sectoral indices see red
Nifty Bank recorded fourth consecutive sessions of losses as key banking stocks such as ICICI Bank, HDFC Bank and Axis Bank declined by 0.8%-1.5% on Thursday.
Auto stocks also plunged into the red on Thursday with Tata Motors down 2.4%, while Eicher Motors declined as much as 4.6% from the previous close.
Shares of Bajaj Auto and TVS Motors also declined by more than 2% on Thursday morning.
Most other sectoral indices were also in the red.
Shares of Bombay Stock Exchange surge
Shares of BSE are trading 7.6% higher currently at 4,153.65 rupees.
The stock is nearing its all-time high of 4,200 rupees, having made an intraday high of 4,177 rupees on Thursday.
Shares of BSE are rising after the Securities and Exchange Board of India on Tuesday announced six new norms for trading in index derivatives.
Metal stocks, ONGC shares gain
Shares of JSW Steel rose 2.8%, while those of Tata Steel gained by 1.2% on Thursday from their previous close.
Hindustan Zinc, Jindal Steel and Vedanta were among the other metal stocks in the Nifty Metal index to gain on Thursday.
At the time of writing, Nifty Metal was up 0.3% from the previous close.
Shares of Oil and Natural Gas Corporation also gained more than 1%. ONGC’s stock gained as higher crude oil prices increase the profitability of upstream oil exploring companies.
The escalating conflict in the Middle East sent oil prices higher on Thursday, as traders kept a close eye on potential disruptions in crude flows from the region.
However, a robust global supply outlook helped limit significant price surges.
By early Thursday morning, Brent crude futures had climbed 80 cents, or 1.08%, to reach $74.70 a barrel. US West Texas Intermediate (WTI) crude also saw a rise, gaining 85 cents, or 1.21%, to settle at $70.95 per barrel.
Market participants remain cautious about the ongoing hostilities between Israel and Iran-backed Hezbollah in Lebanon.
“Following the initial jitters from geopolitical risks in the Middle East, we have seen some calm return to global markets,” Yeap Jun Rong, a market strategist at IG, told Reuters.
But of course, with market participants still keeping a side-eye on any upcoming Israeli response.
Tensions in the Middle East Escalate The situation in the Middle East worsened after Israel conducted airstrikes in central Beirut early Thursday, killing six people.
The strike followed a deadly day for Israeli forces on the Lebanese front, in their continued clashes with Hezbollah.
The violence escalated further after Iran fired over 180 ballistic missiles at Israel the previous day, pushing the conflict beyond the borders of Israel and Palestine into Lebanon and Syria.
“The question for oil now is whether Iran’s energy infrastructure will be in Israel’s crosshairs,” Yeap added, raising concerns about a possible Israeli strike on Iran’s oil facilities.
Tony Sycamore, an IG market analyst, commented on the potential impact of further military action.
“It’s a waiting game to see what Israel’s response will be,” he said.
But I doubt that Israel will target Iranian oil infrastructure, as such a move would likely push oil prices toward $80, which could face resistance from Israel’s allies fighting inflation.
Rising US oil inventories keep prices in check
Even as geopolitical tensions lifted prices, data from the U.S. Energy Information Administration showed a build-up in crude inventories, tempering some of the market’s concerns.
US crude inventories increased by 3.9 million barrels in the week ending September 27, reaching a total of 417 million barrels.
This far exceeded the expected 1.3 million-barrel draw, as forecasted in a Reuters poll.
“Swelling U.S. inventories added evidence that the market is well supplied and can withstand any disruptions,” analysts from ANZ said in a note, providing further reassurance to investors.
Global supply still sufficient despite conflict
Despite the heightened tensions, global oil supplies remain steady for now. Investors remain largely unfazed, as no significant disruptions to crude exports from the Middle East have occurred so far.
OPEC’s spare capacity also offers a buffer against potential supply shortages, according to Jim Simpson, CEO of East Daley Analytics.
“After Iran’s attack, prices may stay elevated or remain more volatile for a little longer, but there’s enough production, there’s enough supply in the world,” he told Reuters.
OPEC’s surplus capacity could absorb the impact of a complete loss of Iranian supply if Israel were to target the country’s oil infrastructure.
However, analysts warn that the situation could change quickly if Iran retaliates by attacking oil installations in neighboring Gulf states.
“The effectively available spare capacity might be much lower if renewed attacks on energy infrastructure in the region occur,” noted Giovanni Staunovo, an analyst at UBS.
As the situation unfolds, oil markets remain on edge, with both geopolitical risks and supply factors keeping prices from swinging too far in either direction.
Warren Buffett’s Berkshire Hathaway Inc. has eased the pace of its sales of Bank of America Corp. stock, marking a third consecutive slowdown in the process.
The sales, which began in mid-July, fetched some of the lowest prices seen since the legendary investor started liquidating shares.
While these stock sales may appear routine, analysts and investors are beginning to wonder if they hint at something more significant on the horizon.
Buffett’s stock sale slows—but why?
According to a regulatory filing on Wednesday, Berkshire Hathaway generated $338 million from selling Bank of America shares earlier this week, a sharp drop from earlier rounds, which averaged about $750 million per sale.
The most recent transactions, which took place on Tuesday and Wednesday, saw an average stock price of $39.40—among the lowest prices Buffett has secured since initiating the sales in mid-July.
Despite the gradual reduction of his position, Buffett’s Berkshire Hathaway remains the largest shareholder of Bank of America, holding 10.2% of the bank’s stock, a stake valued at more than $31 billion.
Yet, the Oracle of Omaha has remained tight-lipped on the rationale behind these disposals, leaving market observers speculating: What is Buffett’s next move?
Could Buffett be preparing for a larger play?
Buffett’s sales of Bank of America shares come amid a time of economic uncertainty and market volatility.
Some market analysts suggest that these sales could be part of a broader strategy to free up capital for a significant acquisition or investment.
Buffett has a history of amassing cash reserves before making big moves during periods of economic turbulence, and with over $147 billion in cash and cash equivalents at Berkshire’s disposal, the company is in a prime position to make substantial acquisitions.
Historically, Buffett has taken advantage of market downturns to buy undervalued companies or invest in industries poised for long-term growth.
With inflation concerns, interest rate hikes, and geopolitical tensions all weighing on global markets, it’s possible that Buffett is preparing for a large-scale move into an entirely new sector—or doubling down on a business he views as undervalued.
Berkshire Hathaway’s size and influence
Under the leadership of Warren Buffett, now 94 years old, Berkshire Hathaway has cemented itself as one of the most successful companies in history.
With a market capitalization of around $990 billion, Berkshire ranks as one of the largest corporations in the S&P 500 and holds the title of the eighth-largest company in the world.
While Berkshire Hathaway is known for not paying dividends, Buffett has crafted a portfolio that thrives on dividend-paying companies.
This strategy has been pivotal in helping Berkshire outperform the broader market, consistently delivering impressive returns for its long-term shareholders.
Diversified holdings across industries
Berkshire Hathaway’s portfolio is vast and varied, spanning several sectors. In addition to utilities, the company owns the BNSF railroad, a number of major insurance firms—including Geico—and an array of manufacturing and retail businesses.
Among these are Precision Castparts, a maker of aviation parts, as well as household names like Dairy Queen and See’s Candies.
This diversification strategy has allowed Berkshire to maintain a dominant position across multiple industries, solidifying its reputation as one of the world’s most formidable conglomerates.
Despite the recent slowdown in Bank of America stock sales, Buffett’s moves are always closely watched, leaving investors speculating on his next strategic play.
The Bank of England (BoE) could adopt a more aggressive stance on interest rate cuts if inflation data continues to improve, according to Governor Andrew Bailey.
However, the escalating conflict in the Middle East poses risks to oil prices, which could complicate the central bank’s plans.
In an interview with The Guardian, Bailey suggested that the BoE might become “a bit more activist” and “a bit more aggressive” in cutting interest rates if inflation continues to show signs of easing.
This comes after recent positive inflation data, which has alleviated some of the central bank’s earlier concerns about persistent price pressures.
Sterling reacted swiftly to Bailey’s comments, dropping by nearly three-quarters of a cent against the US dollar as investors digested the possibility of faster rate cuts in the near future.
Market expectations for a quarter-point rate cut at the BoE’s November meeting surged, with rate futures pricing in a 90% chance of a reduction.
Current interest rate landscape
The BoE’s current benchmark interest rate stands at 5%, following the first rate reduction in four years in August.
While the central bank held rates steady in its most recent meeting, markets are anticipating a further 0.25% cut at the upcoming November meeting.
Bailey’s comments indicate a shift in the BoE’s approach, driven by easing inflation.
“I’m encouraged by how inflation pressures have proven less persistent than we feared,” Bailey said, while emphasizing the importance of monitoring global events that could impact inflation trends.
Middle East conflict and its impact on oil prices
While inflation trends are improving, Bailey also highlighted the risks posed by geopolitical instability in the Middle East.
Rising tensions in the region could lead to a spike in oil prices, complicating the BoE’s efforts to manage inflation and stabilize the economy.
“Geopolitical concerns are very serious,” Bailey told The Guardian.
It’s tragic what’s going on. There are obviously stresses, and the real issue then is how they might interact with some still quite stretched markets in places.
He acknowledged the global efforts to keep oil markets stable, but warned of potential volatility.
There’s a strong commitment to keep the oil market stable, but there’s a point beyond which that control could break down if things got really bad. You have to continuously watch this thing, because it could go wrong.
Investors eye November rate cut
Investors are now fully pricing in a quarter-point rate cut at the BoE’s November meeting, a sentiment that has grown stronger following Bailey’s remarks.
With inflation showing signs of slowing, the central bank may have more room to cut rates and support the economy, provided that global oil prices remain stable.
The BoE’s balancing act between domestic inflation control and external geopolitical risks will be closely watched in the weeks leading up to its November meeting.
A significant rally in Chinese stocks is prompting a shift in global portfolios, as investors seek to capitalize on new opportunities, Bloomberg has reported.
Following Beijing’s aggressive economic stimulus measures, the flow of funds, which previously favored stocks from Japan and Southeast Asia, is reversing direction, according to market analysts.
Shares in markets like South Korea, Indonesia, Malaysia, and Thailand have seen net outflows, while BNP Paribas reports that over $20 billion has been pulled from Japanese equities in the first few weeks of September.
Strong gains in China, challenges for other Asian markets
The rotation of capital may signal the end of a robust run for non-Chinese Asian markets.
Earlier this year, Taiwan benefited from the booming chipmaking sector, while India saw its markets surge on the back of accelerating economic growth.
Southeast Asia also enjoyed a boost due to lower US interest rates, helping regional markets.
Eric Yee, senior portfolio manager at Atlantis Investment Management, confirmed the trend in the report,
“We are trimming our long positions across Asia to fund China purchases. Everyone is doing so. It’s a good policy-driven recovery from rock bottom. You wouldn’t want to miss out on such an opportunity.”
Chinese stocks see a 30% rise, attractive valuations remain
The MSCI China Index has surged more than 30% from its recent low after Chinese authorities rolled out a series of stimulus measures aimed at reviving economic growth.
Despite the rally, valuations remain attractive, with the MSCI China gauge trading at 10.8 times forward earnings, still below its five-year average of 11.7 times.
This leaves room for further gains, as global mutual funds currently have only a 5% allocation in Chinese equities—an all-time low over the past decade, according to EPFR data from August.
While the shift toward Chinese equities is in its initial stages, BNP Paribas strategists, including Jason Lui, noted that investors are beginning to reduce their exposure to Japanese stocks and reallocate funds back into China.
Although this trend has yet to lead to significant outflows from Indian and other emerging markets, the potential for more substantial changes remains.
Maybank analyst Jeffrosenberg Chenlim sees the current fund flow as a “temporary event.”
However, others like Mohit Mirpuri, a fund manager at SGMC Capital, argue that China could be the top performer by the end of 2024.
“The current momentum is hard to ignore,” Mirpuri said, emphasizing the potential for China’s continued growth.
On October 2, 2024, Truist analysts raised their price target for Monolithic Power Systems (NASDAQ: MPWR) to $994, up from $914, representing a potential upside of more than 10% from the previous day’s close.
Following the announcement, MPWR shares saw a 3% gain in early trading. The analysts cited better-than-expected end-market growth, driven by strong client computing and communications demand.
Truist reiterated their Buy rating, confident in MPWR’s continued success in securing design wins, especially in the AI and enterprise data markets.
Strong analyst support for MPWR
Truist is not alone in its bullish outlook. Stifel, after meeting with Monolithic Power’s senior management, also reiterated a Buy rating with an even higher price target of $1,100.
Stifel highlighted MPWR’s innovation in high-performance analog technology, positioning the company as a leader in systems-level solutions.
The firm believes MPWR could outgrow the broader analog semiconductor market by 10% to 15%, with artificial intelligence and enterprise data as key growth drivers.
Oppenheimer echoed similar sentiments after MPWR’s Q2 earnings report, praising its performance amid industry-wide challenges, maintaining a $900 price target.
MPWR Q2 earnings beat expectations
Monolithic Power Systems delivered strong results for the second quarter of 2024, with non-GAAP earnings per share (EPS) of $3.17, exceeding estimates by $0.10.
The company reported revenue of $507.43 million, a 15% year-over-year increase, and well above Wall Street’s consensus estimate of $490.55 million.
Gross margins came in at 55.3%, slightly lower than the previous year but consistent with the company’s guidance.
Operating income also rose by 22% compared to Q1, indicating efficiency gains despite rising operating expenses.
A key driver of MPWR’s recent performance is its exposure to high-growth segments like artificial intelligence and data centers.
In Q2, MPWR saw significant revenue growth in enterprise data, which accounted for over 37% of its total sales.
This segment alone grew by more than 250% compared to last year, driven by increasing demand for AI-related server products.
The company’s shift from being a chip supplier to a full solutions provider has allowed it to capitalize on this growing demand, positioning it for continued market share gains in these high-growth areas.
Geographical divergence in growth
Interestingly, while MPWR experienced robust growth in markets like China and Taiwan, other regions, including the U.S. and Europe, saw revenue declines.
China and Taiwan alone contributed to the majority of the company’s overall revenue increase.
China posted a 30% year-over-year revenue jump, while Taiwan’s sales nearly doubled, driven by strong demand for high-performance computing applications.
In contrast, markets like Japan and Southeast Asia reported declines of over 50%, raising concerns about how reliant MPWR’s growth may be on certain regions.
MPWR stock: valuation metrics and growth potential
Monolithic Power’s stock has surged over 45% year-to-date, significantly outpacing the semiconductor sector’s average gains.
However, this performance has pushed the company’s valuation to lofty levels.
MPWR currently trades at a forward P/E ratio of 63.7x, far higher than the industry average.
Similarly, its price-to-book ratio stands at 19.77x, which is considerably higher than peers like Analog Devices and Texas Instruments, whose multiples hover around 3x to 10x.
Despite this premium valuation, MPWR’s consistent track record of revenue growth, coupled with robust demand from AI and data centers, has led analysts to maintain optimistic projections for 2025.
Cash position and shareholder returns
Monolithic Power’s solid financial footing strengthens its growth outlook.
The company ended Q2 with over $1.3 billion in cash and minimal debt, allowing it to invest heavily in research and development while also returning value to shareholders through dividends and share buybacks.
In 2024, MPWR increased its dividend by 25%, although its yield remains lower than historical averages due to the recent surge in share price.
The company’s free cash flow generation remains strong, even as it ramps up capital expenditures to support future growth.
MPWR stock: strong financial outlook
Looking ahead, MPWR’s management has guided for third-quarter revenue between $590 million and $610 million, a significant increase from the $507.43 million reported in Q2.
If achieved, this would represent an all-time high for the company. With projected gross margins in the range of 55.2% to 55.8%, MPWR appears well-positioned to maintain profitability despite industry-wide challenges.
Analysts expect EPS to continue rising, with projections for FY2025 at $17.51, representing over 25% growth from current levels.
As we assess MPWR’s strong financial performance and analyst support, it’s essential to examine the stock’s price movements more closely.
Now, let’s see what the charts have to say about Monolithic Power Systems’ price trajectory.
Consistent compounder
MPWR has been one of the best-performing stocks within the semiconductor industry delivering over eightfold returns to investors since the start of 2018.
The stock exhibits strong upward momentum across time-frames. However, it has recently faced some resistance near the $954 level having retraced from that level twice in the past few weeks.
Therefore, investors who are bullish on the stock but haven’t bought it yet should only initiate a small long position at current levels with a stop loss below $758.
They can add to this position once the stock gives a decisive breakout above $954.
Traders who have a bearish view of the stock do have a low-risk entry on their hands right now, but the chances of this trade being profitable are slim.
They can initiate a short position near $920 with a stop loss at $256.6 and a profit target of $760.
Copper price rose for two consecutive days as the market reacted to the recent Chinese stimulus and central bank actions.
With China’s National Day holidays, the market is experiencing lower trading volumes. Even so, demand dynamics remain the key driver of copper prices. Copper has an array of uses in the industrial, electrical, and construction sectors.
On Monday, Comex copper futures rallied to $4.79 a pound; a level last recorded on 29th May. With the rising optimism in the market, the bulls are eyeing the record-high hit in mid-May at $5.20.
Granted, tension in the Middle East has continued to underpin the US dollar due to its safe haven status. Similar to other dollar-priced assets, a stronger greenback makes the red metal more expensive for buyers holding foreign currencies.
Copper demand dynamics
US manufacturing sector
In the US, the world’s top economy, recent figures indicated continued contraction of its manufacturing sector. Data released on Tuesday by the Institute of Supply Management (ISM) showed that its manufacturing PMI remained unchanged at 47.2 in September. A figure below 50 usually indicated contraction in the sector.
Even so, the input prices dropped to a 9-month low with the measure for prices paid by manufacturers declining from 54.0 in August to 48.3 in September. At the same time, new orders rose from 44.6 in August to 46.1 in September.
Coupled with the reduced interest rates, investors are optimistic that manufacturing activity in the country will improve in coming months. The market expects the Federal Reserve to deliver two more rate cuts in the last two months of 2024.
Chinese economy
Optimism over the recovery of the Chinese economy is even higher; an aspect that has offered support to copper price in recent sessions. A week ago, the People’s Bank of China (PBoC) delivered an aggressive stimulus package meant to revive the struggling economy. In fact, analysts have termed it as the most significant stimulus package by the central bank since the COVID-19 pandemic.
The measures include cutting the reserve requirement ratios, which is the amount of cash reverse banks should have, by 50 basis points. The move is intended to free up about 1 trillion yuan for further lending. Besides, in an effort to boost the ailing real estate sector, PBoC announced the reduction of the average interest rates for existing mortgages by 50 basis points. For second homes, the minimum down payment requirement was cut from 25% to 15%.
Days later, authorities in several major cities within the Asian country have made similar moves. The Guangzhou city government has lifted all restrictions on home purchases. At the same time, Shanghai’s government reduced the tax-paying period required for migrant families to own a home across certain districts. Shenzhen’s administration also eased the existing home-buying restrictions which had single individuals and families limited to buying one and two homes respectively.
It may take time for these measures to bear fruits. However, the market sentiment is expected to improve with demand for homes increasing and mortgage loan growth expanding. As the property sector recovers, the demand for copper, which is widely used in construction, is set to rise.
In fact, optimism over the Chinese economy has seen the share price of major copper companies surge in recent sessions. For instance, Rio Tinto, the world’s largest mining company, rose to a level last recorded in late May on Monday before pulling back. Similarly, BHP Group’s share price rallying to January levels.
Copper price analysis
The daily chart shows that the price of copper bottomed at $3.95 in August, and then staged a strong comeback, reaching a high of $4.67, its highest point in weeks after China’s stimulus measures.
Copper has remained above the 50-day and 200-day Exponential Moving Averages (EMA), meaning that bulls are in control. It has also risen above the 38.2% Fibonacci Retracement level while oscillators have pointed upwards.
Therefore, technicals point to more gains in the near term. If this happens, copper will likely surge and retest the year-to-date high of $5.17, which is about 10.78% above the current level.
It has been a brutal week for cryptocurrencies as most of them erased gains made last week when investors cheered the Federal Reserve interest rate cuts and the robust stimulus from Chna, the second-biggest economy worldwide.
Bitcoin slipped from $66,300 to about $60,000, while the crypto fear and greed index dropped from the greed area of 60 to 30. Recently launched tokens like Hamster Kombat, Catizen, zkSync, and EigenLayer also retreated, leading to substantial losses for investors.
Still, not all cryptocurrencies have crashed this week. Wormhole (W) price jumped to a high of $0.41, its highest level since June 17, while Sui (SUI) surged, and crossed the crucial resistance point at $2. It has soared by 323% from its lowest level in August and is trading at the highest swing since April 1.
Mantra (OM), a popular crypto in the Real World Asset Tokenisation (RWA) industry, has risen to $1.3, its highest level since July, and a few points below its all-time high. It has been one of the best-performing cryptocurrencies this year as it jumped by more than 2,000%.
Mantra token surged ahead of the mainnet launch
Mantra is a blockchain that aims to become the leading player in the RWA tokenisation industry, which is expected to be a multi-trillion-dollar one in the next few years.
Its goal is to replicate the success of other niche blockchains like Injective and Immutable X. Injective focuses on the financial services industry. At the same time, Immutable X has become a big name in the gaming and NFT sectors.
Mantra will be a fast, cheap, and highly secure blockchain that will let developers tokenise assets like real estate and art.
It has also soared because of its high returns, which dwarf those by other cryptocurrencies like Ethereum, Solana, Avalanche, and Tron. Data shows that Mantra yields over 22%, meaning that a $1,000 investment will bring in $220 annually.
Most notably, unlike other cryptocurrencies, Mantra will not have any dilutive token unlocks in the future since all of its tokens are in circulation. Technically, Mantra token will likely continue rising as bulls target the next key resistance point at $1.4108, its highest point in July.
Wormhole is an important player in the crypto industry in that it offers a bridge that lets people interact with various blockchains at a go. Its top partnerships include Hashflow, Pyth, Mayan Swap, Audius, and Biconomy.
The Wormhole token jumped in a high-volume environment after it was added to the Upbit exchange. It soared to a high of $0.4188, its highest point since June 17, and 160% from its lowest point this year. This surge brought its market cap to over $892 million.
Cryptocurrency prices often jump after being listed by some of the biggest crypto exchanges. Upbit is a notable name because of its popularity in South Korea, a highly active market for digital currencies.
Data shows that most of Wormhole’s surge was driven by Upbit traders, who were buying the U/KRW pair. The pair had a 31% market share in the last 24 hours. Most of the other volume was from Binance and Gate.io.
Wormhole’s challenge is that surges that happen after an asset has been listed in an exchange are often short-lived. On the positive side, it has formed a double-bottom and moved above the 50-day moving average, meaning that gains may be sustainable.
Sui, a top Solana rival, has been one of the fastest-growing layer-1 networks in the industry. Its token has surged from $0.46 in August to $2 today.
This rally happened because of its robust ecosystem growth and its role in the crypto industry. It Total Value Locked (TVL) in the Decentralized Finance (DeFi) industry has jumped to over $1 billion, making it the 7th-biggest cryptocurrency in the industry.
Sui has also become a top holder of stablecoins, which have become the most important assets in crypto payments.
More data shows that Sui is now a leading player in decentralized exchanges (DEX). The total volume handled in the ecosystem rose by 13% in the last seven days to over $695 million. It has become a bigger network than some of the best-known blockchains like Cardano, Near, Tron, Avalanche, and TON.
Technicals show that SUI has more upside as the token formed a golden cross when the 200-day and 50-day Exponential Moving Averages (EMA) crossed each other. The Average Directional Index (ADX) has soared to 55, meaning that the network has high momentum.
Therefore, the path of the least resistance for SUI is bullish as bulls target the key resistance point at $2.17, its highest point in March.
Ripple (XRP) price suffered a harsh reversal this week as sentiment in the crypto industry waned, and as geopolitical risks rose. After surging to $0.6647 last week, Ripple has retreated for four consecutive days and was trading at $0.5417, its lowest point since September 12.
Increased whale activity
This week, Ripple made headlines after Bitwise filed to launch an Exchange-Traded Product (ETP). The ETP will make it easy for people to invest in XRP, one of the biggest players in the crypto industry, with a market cap of over $30 billion.
As a result, data by Santiment showed that many whales continued buying the token, hoping that it would jump ahead of the ETP approval and listing. For example, the 24-hour volume rose by 4% to $2.9 billion.
Most notably, XRP’s total open interest has soared, reaching a multi-month high of $1 billion on 30th September. Rising open interest is a sign that investors are enthusiastic about the token in the futures market.
📺 Bitwise’s XRP ETP filing (not to be confused with an ETF, which would be required if it was a security) has showed a significant on-chain response. Whale activity, social hype, and an 8-month high $2.39B in transaction volume indicates potential bullish momentum—but remember,…
Bitwise’s application is notable because of its role in the crypto industry, where it has become one of the biggest players in Bitcoin and Ethereum ETFs. Its Bitcoin ETF (BITB) has gained over $2.3 billion in assets, while the Ethereum (ETHW) fund has over $237 million in assets.
There is a rising chance that the XRP ETP will be approved because courts have already ruled that it was not a security. If it were a security, then it would have demanded more regulations, including regular disclosures to investors.
In most periods, as we saw with Bitcoin and Ethereum, Ripple is likely to rise ahead of its approval, which could take a few months.
However, in the long term, the XRP ETP will likely have a minimal impact on the token because institutional interest will likely be minimal.
A good example of this is Ethereum, the second-biggest player in the crypto industry, has seen mild interest from investors. Data by Sosovalue shows that all Ether ETFs have over $6.5 billion in net assets. Before the ETF listings, the Grayscale Ethereum Trust (ETHE) has over $9 billion in assets.
The iShares Ethereum ETF has over $928 million in assets, while Fidelity’s FETH has $360 million. On the other hand, their Bitcoin ETFs have over $20 billion and $12 billion in assets, respectively. Therefore, there are signs that investors believe that Bitcoin is their best alternative asset.
The other risk for XRP ETF is that the token has a long history of underperformance. For example, while Bitcoin remains 13% below its all-time high, XRP price is 71% below its record level.
The other important catalyst for the XRP price is the upcoming launch of the Regulated Stablecoin known as RLUSD.
Ripple Labs has been working on this stablecoin in the past few months as it seeks to challenge other issuers like Tether, Circle, and PayPal.
A stablecoin makes sense for Ripple because of its role of incentivising cross-border payments globally. It would be better than using XRP, an asset known for its substantial volatility.
It would also be a big cash earner for Ripple Labs if it succeeds. Stablecoin issuers make money by investing the funds they receive from holders. For example, if a stablecoin has a $1 billion market cap, the issuer can decide to invest in government bonds, which are yielding about 5%.
Tether, which has over $130 billion in assets, has become a cash printer that is more profitable than Blackrock, a company with over $10 trillion in assets.
Ripple, however, will face the challenge that many stablecoin issuers have faced: competing with Tether. For example, PayPal’s PYUSD has accumulated over $692 million in assets despite PayPal’s popularity in the fintech industry.
The other competition is coming from yield-focused stablecoins. Ethena’s USDe stablecoin has gained over $2.5 billion in assets because it pays substantial yields to investors. Other top yield-focused stablecoins are Ondo Finance’s USDY and OUSG, which pay a yield of 5.05% and 5.39%.
The daily chart shows that the XRP price soared to a multi-month-high of $0.6500 last week as cryptocurrencies dived. That was an important level because it struggled to move above it several times since August. As such, it was a false breakout, which explains why it has dropped sharply in the past few days.
XRP price has also moved below the 50-day and 100-day Exponential Moving Averages (EMA). Also, oscillators like the Money Flow Index (MFI) and the Commodity Channel Index (CCI) have all pointed downwards.
Therefore, Ripple will likely continue falling as sellers target the next key support level at $0.4310, its lowest point on August 5. That drop will be confirmed if it drops below the key support at $0.5040, its lowest level on September 6. It also means that the token may drop by over 18% from the current level.
The escalating conflict in the Middle East sent oil prices higher on Thursday, as traders kept a close eye on potential disruptions in crude flows from the region.
However, a robust global supply outlook helped limit significant price surges.
By early Thursday morning, Brent crude futures had climbed 80 cents, or 1.08%, to reach $74.70 a barrel. US West Texas Intermediate (WTI) crude also saw a rise, gaining 85 cents, or 1.21%, to settle at $70.95 per barrel.
Market participants remain cautious about the ongoing hostilities between Israel and Iran-backed Hezbollah in Lebanon.
“Following the initial jitters from geopolitical risks in the Middle East, we have seen some calm return to global markets,” Yeap Jun Rong, a market strategist at IG, told Reuters.
But of course, with market participants still keeping a side-eye on any upcoming Israeli response.
Tensions in the Middle East Escalate The situation in the Middle East worsened after Israel conducted airstrikes in central Beirut early Thursday, killing six people.
The strike followed a deadly day for Israeli forces on the Lebanese front, in their continued clashes with Hezbollah.
The violence escalated further after Iran fired over 180 ballistic missiles at Israel the previous day, pushing the conflict beyond the borders of Israel and Palestine into Lebanon and Syria.
“The question for oil now is whether Iran’s energy infrastructure will be in Israel’s crosshairs,” Yeap added, raising concerns about a possible Israeli strike on Iran’s oil facilities.
Tony Sycamore, an IG market analyst, commented on the potential impact of further military action.
“It’s a waiting game to see what Israel’s response will be,” he said.
But I doubt that Israel will target Iranian oil infrastructure, as such a move would likely push oil prices toward $80, which could face resistance from Israel’s allies fighting inflation.
Rising US oil inventories keep prices in check
Even as geopolitical tensions lifted prices, data from the U.S. Energy Information Administration showed a build-up in crude inventories, tempering some of the market’s concerns.
US crude inventories increased by 3.9 million barrels in the week ending September 27, reaching a total of 417 million barrels.
This far exceeded the expected 1.3 million-barrel draw, as forecasted in a Reuters poll.
“Swelling U.S. inventories added evidence that the market is well supplied and can withstand any disruptions,” analysts from ANZ said in a note, providing further reassurance to investors.
Global supply still sufficient despite conflict
Despite the heightened tensions, global oil supplies remain steady for now. Investors remain largely unfazed, as no significant disruptions to crude exports from the Middle East have occurred so far.
OPEC’s spare capacity also offers a buffer against potential supply shortages, according to Jim Simpson, CEO of East Daley Analytics.
“After Iran’s attack, prices may stay elevated or remain more volatile for a little longer, but there’s enough production, there’s enough supply in the world,” he told Reuters.
OPEC’s surplus capacity could absorb the impact of a complete loss of Iranian supply if Israel were to target the country’s oil infrastructure.
However, analysts warn that the situation could change quickly if Iran retaliates by attacking oil installations in neighboring Gulf states.
“The effectively available spare capacity might be much lower if renewed attacks on energy infrastructure in the region occur,” noted Giovanni Staunovo, an analyst at UBS.
As the situation unfolds, oil markets remain on edge, with both geopolitical risks and supply factors keeping prices from swinging too far in either direction.
