In the last few days, silver prices soared by nearly 10% in just two days, whilst Bitcoin prices gained 21%, and the DAX 40 dropped by 5% from last week’s high. What drives these significant price changes, and why is it prime time to consider funding your ThinkMarkets account
and start trading?
The most waited recession, the second shoe finally drops
Economists and market pundits have been calling for a recession for months as the Federal Reserve increased its funding rate from near zero to 4.75 per cent in the last 12 months. The Nasdaq 100 did indeed drop by 37% from its 2021 high consequently. However, since its October 2022 low, the index was up by 24%, whilst the US economy remained very strong, apparently unaffected by the sharp increase in interest rates.
The reason for the increase in the Nasdaq 100 was because, for the first time in a long time and to investors' surprise, it looked like the Federal Reserve was able to implement a soft landing. This is when the central bank manages to lower inflation and economic growth without crashing the economy.
Yet fast forward a few weeks, and the troubles expected by experts have finally emerged with the spectacular collapse of Silicon Valley Bank (SVB),
a bank highly favoured by the tech industry. The failure marks the second-largest bank collapse in US history.
Over the weekend, the event posed a grave threat to some of the most promising US and UK firms. Indeed, the future lifeblood of these countries was staring down the barrel of bankruptcy, as they had money trapped within the bank and no other funding to survive.
Subsequently, the US and UK governments have been forced to step in to support depositors, and markets have reacted forcefully, sending yields lower and silver and bitcoin prices higher.
New traders may perceive increased market turmoil and recession risk as a reason to avoid trading. However, as a trader we need the markets to move to earn, so some say market turmoil provides the best time to start trading with caution.
No smoke without fire
It is unlikely that the Silicon Valley Bank (SVB) and Silvergate bank, an essential bank for the crypto sector, are the only victims of the increased interest rates. Most leading economic indicators suggest that the unemployment rate is on its way up in the USA, which should send shockwaves across the financial markets and allow experienced traders to capitalize on market volatility.
Technical analysis works better
In times of high volatility, technical analysis can be really handy. Various chart patterns can help traders identify upcoming trading opportunities, such as classical patterns like rectangles, heads and shoulders, and ascending and descending triangles.
All in all, the next few months may be very exciting as risk often brings opportunities. However, make sure to use risk management tools to prevent losses higher than you may anticipate.
Open and fund your trading account with ThinkMarkets
today. Trading during volatile conditions may lead to profits as well as losses.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.