Morning Update: Mon 7th Nov
WTF is going on with FTX
The information in this message does not represent any financial or investment advice. They're just random thoughts in my head.
MACRO - Stocks had a strong close on Friday post the payrolls number, which resulted in SPX and NDQ closing about 1.5% better. Payrolls on Friday came in at 263K which was materially ahead of the 200k consensus number. TBH, I would have expected a decent selloff as a result but I guess it once again just shows you how short this market is. We even saw a decent rally in interest rates off their recent highs on Friday but they've since started to move higher again which puts the curve at 69/434/414/422bps respectively. What's next? Well we have mid-term elections this week which could cause some vol, but for me the most important thing will be CPI on Thursday. The consensus is 8%, which could show a drop vs last month's 8.2% and indeed be the 4th month in a row where inflation is lower. The key thing to watch again will be core inflation (ex Food & Energy) which is actually forecast to drop this month to 6.5% from last month's 6.6%. Remember the commentary last month that shelter inflation was driving most of the big CPI change...I suspect that will still be a problem but it's worth noting that is typically lagged to everything else and it does seem like the Fed will take that into account.
CRYPTO - After a strong weekend rally we find ourselves a bit lower today with BTC at 20.7K and ETH at 1585. We saw some big pumps over the weekend in some favourite alts with $APE being up almost 20% at one stage breaching the $5 mark before selling off once again, and $MATIC continuing its surge settling at 1.2. As I'm sure you all saw, there's a lot of speculation surrounding FTX at the moment. There is a token called FTT, which is the native token for the FTX trading platform. The idea is that it's a "utility token" that gives you certain incentives and access to FTX. 1/3 of FTX fees goes towards buying back the FTT token, so it's kind of like a flywheel scheme for a token that doesn't really have any desirable utility. The thing is, given the token has a huge market cap, and given FTX owns loads of it, they are able to state it on their balance sheet and raise money off the back of that valuation, whether it be in terms of equity or debt. The latter is the worrying part, because if their FTT token is used as collateral for loans, they run the risk of margin calls if the token drops below a certain price. If you are getting Celsius vibes you're on the right track. I don't think this is exactly news to anyone, plus I'd imagine the short base in FTT is now huge and could get eradicated fast, but it does show you how vulnerable FTX could be (and indeed any other companies who've pumped valuations from token drops and have gone on to borrow money against it). IMO worth erring on the side of caution; not a point to sell for me but might as well review some limit orders to buy risk in case more comes to light here.
NFTs - Very quiet volumes in NFTs with the top volumes project being something called "Theirsverse" posting just under 200E of volume. Art Gobblers volumes seem to have dropped off substantially while the floor has dropped a further 10% to 6.5E. Elsewhere we continue to see activity in Fidenzas while RENGA has started to make a comeback with 81 sales totalling 123ETH taking back to a 1.28ETH floor, a 25% move in price. The big talk this weekend is once again royalties, after OpenSea's update
Personally, whether we like it or not, I think all royalties are going to zero unless there is a smart contract standard that enforces otherwise. IMO watch out for projects that have raised millions of dollars on the back of royalty revenue streams. GL this week!