5-Min Monday Macro & Crypto: 29th July 2024
Harris bounces back, Eyes on FOMC, Bullish Week for Crypto
Hello. Thanks for reading. I’m Sankalp. You can join our telegram channel here for more macro & crypto live updates
I spend hours reading, researching and talking to the smartest founders and investors every week. This is my attempt to give you a short 5-10 minutes summary on how I am thinking about Macro & Crypto markets and what lies ahead. Hundreds of hours summarised, so you don't have to.
You can also hear more detailed thoughts on our podcast “Greed is Good” - with myself Sankalp Shangari & my co-host Geoffrey Chen. Make sure you tune in.
“I can’t tell you how to get rich quickly; I can only tell you how to get poor quickly: by trying to get rich quickly.” - Andre Kostolany
MACRO
Harris bounces back, FED FOMC & Jobs report this week
The presidential race is back as Harris has managed to bring back democrats back in the poll bounce as well a resuming the fundraising. It’s no longer a sure shot Trump victory, although polls still suggest trump leading by 60:40.
Meanwhile, FED we have FOMC this week and Powell is not expected to change anything. But what is MOST important is the groundwork he lays for a Sept rate cut. His language on forward guidance should be your guide for August trade set up.
We also have Friday jobs report. If unemployment continues to up, and inflation stays stable to disinflationary, that would raise chances of further rate cuts to 50 bps. That is not necessary bullish for equities as we start to move from slowdown theme to a contraction theme. Markets could get spooked. That is not my base case. I don’t think FED will cut aggressively unless the economy tanks with recessionary worries. We remain in goldilocks sweet spot.
Stocks sold aggressively on Thursday as small caps rotation continues. market are nervous once again and Kamala Harris starts to raise in polls and election outcomes become uncertain. As highlighted last week and the week before, I believe this rotation will continue as rate cuts are an almost certainty and economy is still not contracting yet. But as growth slows further and goldilocks conditions ease, small caps will also take a pause. Meanwhile, I think we are starting to see some good opportunities in tech and local bottoms might be considered for a rebound in the immediate term.
STOCKS, BONDS, FX
Election FUD (Fear, Uncertainty & Doubt) causing tech sell off, rate cuts causing mid caps to jump
A rough week for tech as Mag 7 wiped off nearly $1.75 billion in market cap on Wednesday & Thursday mostly. We must remember that holidays and summer are seasonally bearish for stocks and that seems to be done for now IMO. As rate cut certainty rises above 90%, markets will start to rejoice at point with an eye on FED’s forward guidance, core PCE nos and jobs reports.
Mid and small caps like Pharma, and other old schools stocks gained back on Friday while Tech sell off seems to have bottomed for now IMO. The AI narrative is also winding down as we shared in our last weeks newsletter, and now 100’s of articles on how OpenAI is set to lose $5bn a year in expenses. And suddenly the market has woken up from a slumber dream - how to monetise all this AI spend. Seems very coordinated, but is also very true as AI hype narrative seems to be overdone, and monetisation of this capes seems years away. But the market always knew that.
Smart managers do not want to take chances as there is a too much uncertainty on AI, macro numbers, elections etc. Better safe than sorry. I keep pondering and trying to answer the following:
What if there are no rate cuts and market is wrong?
What if democratic machine does its wonders, and Kamala wins?
What if OpenAI cannot raise money quickly?
What if Trump wins and that turns out to be bad for tech?
What if there is another wat type or COVID type black swan?
Are you positioned and hedged for that?
Meanwhile, we all know Trump is pro liquidity and pro MMT, while Harris is status quo more or less. Same goes for crypto. Trump is good for crypto and Harris is not. As simple as that. The extent of that goodness depends on several external factors that we have discussed many times in previous issues here.
Link to GS bear AI report again below.
In the land of rates and bonds, bull steepening continues. That is difference between 10Y and 2Y yields is less negative now.
FX has been active again as most carry trades globally saw an unwind., especially the BoJ. This weeks meeting will give more colour. USDJPY, EURCHF, USDMXN, USDBRL, AUDJPY unwinds happened across board.
CRYPTO
A bullish week for BTC and SOL
MAJORS
As I type this, BTC is trading around $69.5K followed by a very bullish week. The Bitcoin Conference in Nashville was a shining moment in BTC’s history. While Trump made promises to create a Bitcoin reserve if elected, it was Senator Cynthia Lummis that stole the show IMO by announcing a bill to create a Bitcoin reserve. The consequences of both these announcements are humongous, akin to the 1944 Bretton Woods. The proposal is to accumulate at least one million BTC over five years, including the 210,000 BTC currently held by DoJ as core. I covered the consequences in detail in this tweet below:
The week turned more bullish as Michigan Retirement System disclosed 110,000 shares of the ARK 21Shares Bitcoin ETF just like Wisconsin did last week with $164 million investment in spot Bitcoin ETFs, and so did Jersey as well several other US city pension funds. No one was talking about Mt Gox sell pressure anymore this weekend.
That said, BTC is trading around $70K and still within its $60-$74K range. Any break above it and we could quickly fly to $85K or any tech or macro driven sell off could see us back down to $65K. Since tech sell off has already happened, we are of the view that there are no massive surprises unless FED and Jobs Report are here to prove us wrong. The weekly close and Monday action is indicating the continuation of the bullish price trend. BTC is in a very nice accumulation pattern with eyes back on ATH’s.
Solana has been our favourite for months as covered extensively in channels, especially the live trades in 52 Trades in 52 weeks. That has been our best performer this year. Sol/BTC and Sol/ETH have been on a. tear all year and we believe there is much more room for Solana to touch atleast $300. You can read in more detail on our blogs at Hashtalk.
ETH has been a laggard and we have been pushing this live on our TG channel and moving out of ETH gradually and more into BTC and Solana. Besides TradFi boys playing some arbitrage games, I don’t see ETH coming out of woods yet. VC led 100’s of L2’s are just here to make quick buck without any real activity and revenue. While, Solana has no real activity either but you have to accept the fact that this crypto bull run has been led by (and continues to) memecoins. And 90% of those memecoins are on Solana.
That does not mean that ETH cannot rebound from here. Just like thew BTC launch, I believe ETH will see some more outflows from GBTC, and then a pump led by TradFi. A short term rebound is very much possible here as ETHBTC seems to be oversold here but I seriously doubt if ETH can break the long-term downtrend since mid-2022 versus BTC & SOL.
I am no Solana maxi. And I am no ETH bear. I’ve held ETH for years. From 2016 up until early 2024. I am here to identify opportunities as I see it from my experience and network and transparently disclose here.
ALTS
I continue to focus on Solana ecosystem for now. It’s a very easy play IMO and I do not wish to complicate my trading life. While $SOL is up like 40-50% from June, and only 10% from its yearly high at $201, SOL ecosystem coins have recently starting to outperform. $JUP, $PYTH, $JTO, $RAY, $HNT are still very attractive.
NARRATIVES
ORDINALS: Along with $BTC, the Ordinal coins such as $STX, $ORDI, $SATS, & $RATS are up between 50-150%.
CAT & DOG COINS: continue as the fav memes. While these coins have pumped a lot, but if SOL rally continues, these coins like $POPCAT, $MOG, $WIF should have more legs. The ones that did well this week were the third largest cat coin $MEW and top celebrity coin $MOTHER that we covered in detail in our 52 Week Newsletter last week.
New CT craze coin is the ‘mother of Kabosu’, who is the original $DOGE dog from the meme, posted a picture of her new Shiba Inu, called Neiro - being described as “DOGE #2” . Suddenly we had clones of clones and chaos erupted.
