5-Min Monday Macro & Crypto: 21st Oct 2024
Stocks ATH, BTC reaching $70K, An AI Agent Shilling itself to $400mn mcap
Hey!!!! It’s Monday again. Welcome to another fantastic week!
I spend hours reading, researching, and talking to the smartest founders and investors in macro, crypto, and AI every week. This is my attempt to give you a short 5-10 minute summary on how I am thinking about the macro and crypto markets and what lies ahead. Hundreds of hours summarized, so you don't have to.
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“History remembers the artist. The artists are the people who are creative and do their own thing. Great software is art. Great business is art. Starting a new country is art. You're creating something out of nothing. But it can't be forced. Art is done for its own sake."
- Naval Ravikant
Weekly Hashtalk Poll - Trump is leading our polls, rightly so IMO
THE MACRO ZEITGEIST
All Eyes on Elections
The current global macro environment is like being handed a parachute while skydiving—you’re thrilled at the possibilities, but there's always the risk the ground is coming up faster than you think! While every flying object (or bird) passes you by - elections, middle eastern tensions, macro data, Russia - Ukraine, liquidity taps in US / EU, China stimulus etc. What a whirlwind of situation…….Let’s try and break it down:
Liquidity Surge Across Major Economies: With China leading the charge on monetary expansion, followed closely by other major economies, the world is awash in liquidity. Think of it as a money-printing party, where central banks are throwing cash around like confetti. In such a reflationary environment, it’s tempting to push the envelope with high-risk, long-term investments—enter crypto.
Geopolitical Tension Looming Large: Here’s the catch—and it’s a big one. The escalating conflict between Israel and Iran has the potential to send shockwaves through the global markets. If tensions spiral into a catastrophic event—like the destruction of oil fields in the Persian Gulf or the closure of the Strait of Hormuz—it would trigger severe disruptions, particularly in energy markets. Picture this: It’s all fun and games until someone takes out the oil supply. In the event of a nuclear incident, we could see global markets, including crypto, suffer a sharp and painful correction. As the old saying goes, "War is uninvestable."
FED Cuts & Data- When it comes to the Fed, I’m keeping it simple—just like they are. CPI from a couple of weeks ago? It’s like worrying about a flat tire when you’re already at the finish line—basically, inflation’s not even part of the conversation anymore. Let’s move on to Jobs - A little wobbly, kind of like trying to walk after stepping off a roller coaster (thanks, hurricane season). But after the initial shake-up, everything’s looking just fine. So, all's calm. Let’s just keep cruising with a steady 25 bps hike each month—same plan, no drama!
Elections: Trump (Risk On) vs. Harris (Status Quo)
On the Polymarket prediction markets platform, Trump's odds have increased to 61%, while Harris's have decreased to 39%.
While Trump’s odds are rising, Kamala is consistently shooting herself in the foot. And that is putting a bid on risky assets. If by any chance Kamala wins, we will see a massive unwind right away.
GLOBAL MARKETS
Middle Eastern War & Its Global Effects
Israel may be planning a significant strike and my fear is that the more Israel insists it won’t target Iranian oil or nuclear sites, the more likely it seems that’s exactly what they’re planning. BUT BUT BUT - Biden & Kamala have send their THAAD missiles to Israel on the promise that no war non-sense before the elections. This is my take, my “personal” conspiracy theory and not corroborated with anyone. Btw, Last Sunday, the U.S. announced the deployment of troops and an advanced anti-missile system to Israel. Bitcoin could see both speculative buying as a safe-haven asset and panic selling if broader markets collapse.
ECB's Rate Cut and Policy Outlook
ECB cut rates by 25bps to 3.25%, just like its FED & Chinese stimulus brethren. As we explained last week, this is all coordinated. ECB acknowledged disflatiomn is seeping in and is very worried. I am expecting more rate cuts and potentially we will see 2-2.5% by middle of next year.
China - Long Run Everyone Lost
DATA TO WATCH THIS MONTH
Oct 24: U.S. Initial Jobless Claims / Manufacturing & Services PMI
MACRO SUMMARY
Markets buoyant as Trump’s odds rise above 60%.
STOCKS, BONDS & FX
Stocks
As Trump’s chances of winning rise, so do the S&P 500 and NASDAQ, steadily approaching all-time highs. The good news this time around, unlike Q1 of 2024, is that this rally is broader, encompassing more sectors. However, things could get rocky ahead. Bulls are piling in, unwilling to miss out in case Trump wins and ignites a fresh wave of Modern Monetary Theory (MMT). Investors seem to be shrugging off concerns about China's economic softness, deflation, and global geopolitical issues as they rush to capitalize on the market rally.
That said, as we head into election season, I’m leaning towards caution. It might be time to take some chips off the table. While optimism is high, I’m the contrarian here—most of the upside appears to be priced in, unless we see significant earnings surprises.
My Mental Model for Stocks Heading Into Q4:
Core Exposure: S&P 500 & NASDAQ ETFs (50%)
I’ll maintain a core position in passive ETFs, particularly in the S&P 500 and NASDAQ. The broad exposure here still makes sense, but it's important to stay balanced.
AI Exposure: Semiconductors & NVIDIA
I’m bullish on AI, with specific focus on semiconductor stocks and leaders like NVIDIA. We recommended NVIDIA at $105 during the recent pullback—wish I had loaded up more! AI isn’t just hype, it's driving real market value, and staying exposed here is key.
Venture Capital/Private Equity in AI
Getting exposure to AI through VC and PE deals is high risk but high reward. Deal sourcing and due diligence are tough in this space, but at Rising Capital, this is exactly what we specialize in—identifying and backing innovative AI-driven companies.
Diversification into Commodities
In addition to equities, I’m holding positions in Silver, Gold, and Uranium. These commodities provide a hedge against broader market volatility, alongside our crypto exposure.
Hedging with Oil & Defensive Plays
I’m hedging cautiously, especially with the geopolitical risk in play. Oil names could spike if war escalates, and I’m buying some protection through put options or put spreads on the Russell 2000. You might also want to consider some of those exotic structures your private banker is selling (even though they may not admit it, they’re hedging too!).
What to Expect:
Right now, you could practically pick any asset class and make decent returns—gold and equities are both climbing, and crypto is heating up again. However, I expect we’ll be in for some choppy waters as we wait for real election outcomes, not just market speculation driven by Polymarket or prediction markets.
For now, I’m keeping a careful eye on the markets and holding off on going all-in until the political dust settles. Sometimes, it’s better to be the contrarian, especially when most of the optimism is already priced in.
CRYPTO
Bitcoin has breached the $70K mark, only to retrace to $68K due to strong resistance and a supply overhang at the $68-69K levels. Just last week, BTC surged from $59K to $69K—an impressive $10,000 rise in a short span. Phenomenal, to say the least. This rally can largely be attributed to a combination of factors: Trump’s rising election odds, global liquidity injections, and improving U.S. macroeconomic data. All of these elements have come together to create the perfect storm for Bitcoin’s recent run.
We’ve been bullish on crypto for several weeks now, and it’s time to recap our position:
BTC Halving Cycle: The effects of Bitcoin’s halving cycle are just beginning, with mid-October marking the starting point of this historically bullish period.
Macro Environment & Fed Cycle: We are entering a favorable macroeconomic landscape, supported by the Fed's current policy, which is setting the stage for a strong crypto market.
Negative Sentiment Behind Us: The market has already shaken off the excessive selling pressure that clouded the last quarter. We’re past the worst of the negative sentiment.
Institutional Money Flowing In: New funds and institutional capital are coming into the market, as evidenced by ETF flows over the last two weeks. However, keep in mind, most of this is going into Bitcoin (and some into ETH). The rest of the crypto market, as we covered in the State of Crypto report three weeks ago, is a different story.
BTC Poised for a Massive Rally: After consolidating and coiling for weeks, Bitcoin is primed for a major breakout, especially with Trump’s chances of winning the presidency becoming more apparent.
Funds Cautiously Positioning: Funds have been sitting on the sidelines, cautiously deploying capital and waiting for the right moment. Now, it seems they are saving up for the rally that’s about to unfold.
All signals are pointing towards a major rally in Bitcoin, and we believe this is just the beginning of a strong upward move in the coming months.
Altcoins have also caught fire as the broader market sentiment turned bullish. Notably, $APE, $SOL, $DYDX, and a few AI-related coins have seen impressive gains.
The AI sector in crypto stood out as the most profitable last month, but the memecoin frenzy is far from over, especially with a new player in town: $GOAT. What makes $GOAT unique is its fully AI-driven launch, orchestrated by Truth Terminal, an AI agent created by Andy Ayrey. In a mind-boggling twist, there’s no human involvement—AI shilling AI and managing its own coin. We covered this groundbreaking development in a detailed article, highlighting how $GOAT and its AI-driven management model could redefine the future of memecoins.
It's truly a fascinating shift, where artificial intelligence is not only shaping technological innovation but also starting to manage its own financial ecosystems.
a16z released its State of Crypt Report. You can read it below.
A look at Bitcoin Ecosystem Funding. While the market was consolidating this ecosystem has been growing quietly beneath the hood.
INTERESTING STUFF
Stan Druckenmiller’s views on Macro and elections are always must hear.
🎙️ Podcast Spotlight: "Greed is Good" – Insights You Can't Miss!
Explore the latest in crypto as Sanat Kapur from Dragonfly breaks down trends, the future of Ethereum, and the rise of stablecoins.
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