BBVA And Sabadell Ended Merger Talks, And Bitcoin's Price Took A Tumble

BBVA And Sabadell Ended Merger Talks, And Bitcoin's Price Took A Tumble

about 3 years ago3 mins

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BBVA and Sabadell just can’t see eye to eye: the two Spanish banks ended merger talks after struggling to come to a compromise on price 👀

What does this mean?

Sabadell’s been keen to merge with another Spanish bank for a while now, and it managed to catch the attention of heavy-hitter BBVA – worth $30 billion to Sabadell’s $2.5 billion. But when they actually sat round a table to work out details, BBVA’s proposed price didn’t go down too well – and now it looks like Sabadell’s rejected it outright.

Not that BBVA’s losing much sleep over it: the bank – which has plenty of cash to spend after selling its US operations 💵 – saw its share price rise when it mentioned the deal was just one of several options. Sabadell, meanwhile, is under increasing pressure to boost profitability. And while it did say it’ll release a new business plan in 2021, it wasn’t enough to convince investors – and its shares plummeted.

Spanish bank merger halted

Why should I care?

There’s been a lot of deal talk among Spanish banks lately, mostly because of the tough time they’ve been going through as their recession-squeezed customers miss loan repayments 🇪🇸 And even the loans that are being repaid aren’t as profitable as they were, hobbled as they are by ultra-low interest rates. A deal, then, would allow banks to combine their revenues and cut duplicate costs (i.e. synergies), which is why this might not be the last you hear of a Saba-deal.

BBVA isn’t the only one with cash to burn right now: investment firm 3G Capital is sitting on $10 billion, but it’s reportedly holding off from making deals amid all the coronavirus uncertainty and all-time high valuations 🦠 Investing legend Warren Buffett isn’t having much luck either, which might be why his company, Berkshire Hathaway, has resorted to buying record amounts of its own shares.

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Bitcoin's Price Took A Tumble

Bitcoin image

Bitcoin’s suddenly looking a bit less convincing: the cryptocurrency dropped 10% late last week, even after having hit new highs a few days before 🔓

What does this mean?

Bitcoin’s been on a tear this year: its price has risen 130% versus the US stock market’s 14%, and just last Wednesday it hit the $19,600 mark – its highest since December 2017. That might be because mainstream investors seem to be coming around to digital currencies: PayPal announced last month it’d let its users buy and sell cryptocurrencies using their PayPal accounts, and last week an easy way for stock and bond market investors to buy into crypto – a bitcoin exchange-traded note – launched in Germany.

More individual bitcoin addresses are holding cash than in 2017
Source: Bloomberg

But not long after bitcoin peaked, its price fell by the biggest amount in a single day since March 📉 And that could be because investors wanted to lock in their profits: analysis by crypto firm Intotheblock showed several big traders effectively moving their coins onto exchanges – suggesting they were gearing up to sell.

Bitcoin had its worst price drop since March

Why should I care?

Investors might be worried that 2017 – when bitcoin’s price skyrocketed, only to collapse shortly after – is happening all over again. This time around, though, crypto enthusiasts could argue that bitcoin’s reputation as a “safe haven” in volatile times makes its price more sustainable 🤷‍♀️ Kansas City Federal Reserve probably disagrees: the reserve bank concluded in April that bitcoin behaves exactly like a risky asset – which means investors are essentially betting on supply and demand to work in their favor.

When you own a cryptocurrency, what you actually own is a private key that lets you make transactions from a given “address” 🗝 That means keeping your key out of hackers’ grubby little hands is your number one priority. It can be expensive, though, so be sure to account for the additional cost if you’re thinking of taking the plunge.

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