In the midst of a long bear market, the earnings of the world’s leading banks have increased as a result of investors’ preference for conventional currencies. They seem to have abandoned cryptocurrencies.
Bloomberg reported on October 10 that after years of stagnating volumes, trade involving conventional currencies had risen to historical levels with a 30% increase.
The cash return has been ascribed to the volatility of risky assets such as Bitcoin (BTC) and the broader crypto industry in the context of ongoing interest rate rises and geopolitical concerns.
Deutsche Bank, UBS Group AG, and JPMorgan (NYSE: JPM), who control a combined 30% of the market, are the principal benefactors of the current circumstance. For example, JPMorgan’s fixed-income markets division increased by 15% in the second quarter.
In addition, UBS said that foreign currency was the primary driver of their 19% revenue growth. The remainder of Deutsche Bank’s revenue increased by 32%, resulting in the bank’s highest second quarter in a decade.
“Cryptocurrencies seemed to be having all the fun until central banks began destroying them. Inflation was required to reverse the secular drop in currency volatility caused by years of central bank control. Volatility offers opportunities and is a trader’s greatest friend, according to Bloomberg Intelligence’s senior global derivatives analyst, Tanvir Sandhu.
Concurrently, it is noteworthy that the crypto market has fallen in 2022, but the Bitcoin Volatility Index has declined from its May high. In contrast, the currency volatility trackers of Deutsche Bank and JPMorgan Chase & Co. are at their highest levels in a decade, with the exception of a surge recorded during the outbreak of the pandemic.
According to analysts, the gains of big banks indicate that investors are shifting to a higher range for interest rates and bond yield components, which is expected to be followed by more currency volatility.
In light of the present economic circumstances, the U.S. dollar has emerged as a crucial market hedge as other global currencies have seen major declines. As stated by Finbold, investors from various nations turned to Bitcoin as a hedge or profit arbitrage due to the strengthening dollar.
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