Market Update: Mon 5th Aug
FULL PANIC
gm
**MACRO** - Well well well...it was another bloody close for equities with SPX and NDQ closing 1.8% and 2.4% lower respectively, but today looks even uglier with there being a 2.4% and 4% move lower in futures...actually NDQ futures were down as much as 5.5% at one stage which was pretty shocking. Payrolls came in at 114k vs 175k expected which is one of the biggest misses we've seen in a long time, and this was enough to completely spook markets lower. What seems to be having a bigger effect though is the unwind of the Yen carry trade. This is when people borrow in Yen (coz interest rates have been low/zero for a long time given low inflation/deflation in Japan) and ten reinvest proceeds in a currency with higher return (ie USD). What's happened now is that the BoJ has started raising rates while US treasury yields have been declining, making that trade far less attractive and causing a big sell off in USD/JPY. Basically....a popular trade has been to take de-factor leverage by borrowing in Yen to buy US tech stocks, and given the path of interest rates in Japan we are now seeing that unwind. So what happens now? Well the next FOMC is not until September, but the market is pricing in a 60% chance of a rate cut within the next week; this implies we may well see an emergency FOMC. Whether something happens this week or not idk, but I think if market volatility persists it's highly likely we see an FOMC in August which wasn't originally planned. The funny thing about a rate cut is while it will help ease concerns on equity/US economy, it further exacerbates the worsening in USD/JPY so it's a bit of a double-edged sword.
**CRYPTO** - Well we're just fully moving with equities at the moment, just with a lot more beta as BTC sits a 53k having hit 50k, ETH at 2330 having gone sub 2000 and SOL at 122 having hit around 110 area. Incredibly SO/ETH is up like 7% in the last couple of days while ETH/BTC is down to 0.044 showing how terrible ETH is trading now and it feels like it's full towel throwing that's occurring there, not to mention Jump liquidating over $400m of ETH as part of a general unwind. Look ultimately I think this is going to be a good dip to buy but given the volatility I would make sure to DCA, that is i you have any funds left. I think I have a preference for BTC or SOL here given they have far superior narratives to ETH, which seems to have failed at every opportunity to prove itself this year. One thing I would note is that this market turmoil has caused Trump to rise in the polls and that will be a small positive takeaway for crypto. A lot of alts and memes are down big. I am probably the most catuious on memes now having been pretty bullish all year, and as mentioned before I think this is attributable to the pump dot fun phenomenon making it too easy to make memecoins and as such dividing attention and making it very tough for any coin to break beyond a $150-200m mkt cap. I don't think we'll see another Solana meme coin hit $1bn mkt cap this cycle. Anyways, my biggest advice if you are down bad rn is to consolidate to positions that you actually believe in and can hold without worrying for long periods of time (this tends to be majors for most people) - this is the type of move that will kill many random memecoins forever, but there is always that small probability things bounce back hard and it all really depends on your personal levels of comfort in this market. My plan is probably to chuck more fiat into crypto but I think I'll be targeting 50k and below for BTC and 100 and below for SOL with an aim to DCA - not sure we get there but gonna be ready in case we do, otherwise I'm just holding.
GL and hope you're okay