The information in this message does not represent any financial or investment advice. They're just random thoughts in my head.
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MACRO - Well what a fucking weekend. Honestly in the last 2 years of crypto and staying very disciplined I broke my own rules and panic sold some ETH into the lows of the FUD. Luckily I did on small size and luckily I bought it back at a 10% loss but that was a real reminder to myself to just stick to the price targets and structure I've set out for myself and not to deviate!!! At moments this weekend it felt as bad as the banking system was going to collapse. I think the problem was that I was reading too much FinTwit which actually does not comprise the smartest guys in the room, rather an engagement farm of manipulated information with the ambition of dopamine hits. Anyway, so here's what's happened - the Fed announced a new lending facility on Sunday with the purpose of providing funding to affected institutions. The thing is, recovery on SVB deposits is actually likely to be very high, but it will probably take years for things to get resolved in court and companies obviously have short-term working capital requirements. The idea here is to bridge the liability mismatch. Markets are rallying on this news because of the view that deposits will mostly be saved. It's worth noting that there is a contagion effect here in other affected banks and runs on them, e.g. First Republic is down 60% in pre market at time of writing. The main issue here is that we're seeing an unwind of poor decision making and risk discipline as the Fed increased rates last year. SVB had a tonne of interest rate exposure and didn't do anything about it (just assumed bonds would never go lower) and were just banking on the Fed to pivot this year. It makes you wonder who else has a terrible portfolio of government bonds out there hoping in silence (it would seem First Republic is one of them). As a result, I find it very hard to think the Fed is going to raise rates further, or even be hawkish. Powell has definitely fucked it up, but you are now faced with the potential of some sort of banking collapse, vs high inflation in the medium term, and let me tell you the latter is the lesser of two evils for sure. Tomorrow we have CPI, inflation is expected to be 6% vs 6.4% last month. If that number comes in line or lower you can expect what may well be a dovish Fed in March. The thing is, while this is good short term, it actually creates a big problem medium to long term. We may even get a scenario where we have lower interest rates and higher inflation (a la 2021) which is actually what fuelled the crypto and subsequent NFT rally. As my friend and former colleague Mando put it, "it's so bad it's good". But tbh it is really bad, when you take a step back..how messed up are markets rn. Have to think Powell is out the door after seemingly appearing to steer us to a soft landing in January.
CRYPTO - We fell as low as 1385 and like 19.8k on ETH and BTC before rallying back to 1600 and 22k. Of course the big worry over the weekend were stable coins as USDC lost its peg and fell to as low as 89c before recovering back to 99c as of today. Circle, the parent company of USDC, had funds in SVB to the tune of about 8% of the backed value. TBH, my take on that is if you own a large chunk of it or have it in a project treasury you are meant to sell. Upside/downside is like +10%/-100%...sure Circle came out and gave us information but you always have to NOT take these things at face value and consider the risk/reward IMO. It's fine for degen funds, but for real shit that you can't lose, have to conduct proper risk management. As per above, we could weirdly be entering a bullish period for crypto. The fact that banks are fucking up is bullish for self-custodied BTC/ETH and if you do get a dovish Fed with a persistent inflation backdrop you're going to see crypto rally. I think the short-term impact of any risk-off scenario is a move lower as risk assets get destroyed, but there is a pretty strong bull case for the medium to long term here.
NFTs - Honestly it felt like everything was going to collapse at one stage and floors did get decimated over the weekend, but over the last 24H we've staged what to me is a rather impressive recovery with things generally up 5-10% off the lows. It's interesting to see the "fallen angel" trio of Moonbirds, Doodles and CloneX continue to fall further and if you're a frequent reader you probably know by now that that does not surprise me given their business models and misunderstanding of the NFT market. Given how much money they've raised, at big valuations (I guess CloneX is diff with Nike) I continue to think those businesses (yes they are businesses) are in trouble. $BLUR is the thinig to keep an eye on here which is decently off recent lows. I'm still skeptical on the NFT market overall but honestly its life never ceases to amaze me!
NB: Just as I finished writing this markets completely sold off again - expect a volatile session!
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