5-Min Monday Macro & Crypto: 2nd Sept 2024
Good macro, bad crypto, all eyes on jobs data and presidential debate for next leg. Q4 should be massive IMO
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”
“Aldous Huxley on approaching life with lightness, even in the face of difficulty:
"It's dark because you are trying too hard. Lightly child, lightly. Learn to do everything lightly. Yes, feel lightly even though you're feeling deeply. Just lightly let things happen and lightly cope with them. I was so preposterously serious in those days, such a humorless little prig.
Lightly, lightly – it's the best advice ever given me... So throw away your baggage and go forward. There are quicksands all about you, sucking at your feet, trying to suck you down into fear and self-pity and despair. That’s why you must walk so lightly."
Source: Island via James Clear
MACRO
Let’s start this week and month, with a simple poll
It’s that time again—the first week of the month, where we step back and take a broader view, setting aside the noise of week-to-week fluctuations. August was a wild ride, kicking off with a brutal sell-off but ending with a dramatic V-shaped recovery. Everything, that is, except crypto, which remains stuck in the mud.
U.S. stocks have clawed their way back to near all-time highs, the dollar has dipped slightly, the Nikkei has pulled back a bit, and treasury yields have softened. But as we turn the page to September, the landscape looks ripe for action. Historically, September has been a sluggish month for stocks and a downer for crypto. Will this year break the mold? Let’s dive in and see what might be in store.
THE MARKET ZEITGEIST
This month’s market pulse is tuned into three pivotal events:
Trump vs. Harris Debate on September 10th: The spotlight is on as Trump and Harris go head-to-head. Harris has stirred the pot with her corporate tax plans, including price controls and taxing unrealized capital gains. Meanwhile, RFK Jr. and Tulsi Gabbard have thrown their weight behind Trump. It feels like we’re in a historical deadlock, where either candidate could trip up at any moment. But, in my opinion, a Trump win would likely be more favorable for risk assets, particularly crypto.
U.S. Nonfarm Payrolls, Unemployment Rate, and Initial Jobless Claims on September 5th & 6th: These reports are crucial—they’ll pave the way for either a 25 bps or 50 bps rate decision in November and set the tone for whether we’re heading toward a recession or steering clear of one. I expect the upcoming NFP to counteract the surprise from August, bringing a sense of calm to the markets and prompting a shift from defensive to growth stocks.
U.S. FOMC Rate Cut Decision on September 18th: While a rate cut seems baked in already, the fact that it’s happening signals the start of a new macro cycle, especially in this high-stakes election year. With years of liquidity tightening potentially giving way, Q4 is shaping up to be nothing short of epic.
THE BIG MACRO PICTURE
Eyes on NFP numbers and Presidential debate this week
There's no recession in sight, and the latest U.S. economic data backs this up. GDP has outperformed expectations, inflation is on the mend, and while tech might be lagging a bit, growth stocks are picking up the slack. Concerns about the health of the U.S. consumer seem exaggerated—household net wealth has grown significantly, cash reserves are plentiful, and debt service ratios are hovering near historic lows. The bottom line is that most people have stable jobs, and with a resilient labor market, upcoming interest rate cuts should bring some relief.
My friend
from covers this beautifully in his latest piece:
GLOBAL MARKETS
Eurozone inflation dropped to 2.2% in August, a decrease from 2.6% in July, marking the lowest level in three years. This trend suggests that the European Central Bank (ECB) is likely to continue with its rate cuts to stimulate economies like Germany's, where manufacturing is faltering and pushing the entire region toward recession. If conditions worsen, the ECB might accelerate its rate cuts, unleashing a flood of liquidity and driving real interest rates into negative territory.
Meanwhile, Japan is dealing with stronger inflation, as Tokyo's core CPI rose to 2.4%, up from 2.2%. This is in the context of an economy burdened by a staggering debt-to-GDP ratio of over 260%. Given these circumstances, the Bank of Japan (BoJ) remains unable to raise rates, meaning the Yen carry trade is likely to persist for some time.
China's situation is increasingly concerning, with ongoing struggles in its property market and contractions in both stocks and manufacturing. Declining exports are fueling deflationary pressures, and rising urban unemployment is heightening the risk of civil unrest, particularly among the youth. Additionally, Chinese government subsidies have led to lower export prices in sectors like metal, furniture, and autos. These subsidized products are gaining market share, especially in emerging markets, as they face growing barriers in developed markets.
DATA TO WATCH THIS MONTH
September 5 - U.S. Initial Jobless Claims
September 6 - U.S. Nonfarm Payrolls / Unemployment Rate
September 11 - U.S. Consumer Price Index for August
September 17 - U.S. Retail Sales
September 18 - U.S. FOMC Interest Rate Decision
September 27 - BTC CME August (BTCU24) Options Expiry
To sum up this week’s macro outlook: The economy shows no signs of slipping into a recession, and the anticipated rate cuts in this election year are likely to propel stocks to new all-time highs in Q4. However, September is expected to be more of a range-bound and consolidating period overall.
STOCKS, BONDS, FX
NVIDIA + Growth vs Value Trade
No stock commentary is complete these days without giving NVIDIA its due mention. The company posted stellar results this week, but the stock still took a hit. So, what happened? Let’s break it down.
Every fund manager and retail trader, much like the degens in the crypto world, was primed to capitalize on NVIDIA—leveraged to the hilt, with long calls, and some with long puts. But here's the kicker: retail traders often forget that market makers have been positioning themselves for months for exactly these kinds of events. Whether it’s buying or selling, the market makers rake in the profits first. It’s a game of chess, and they’re always a few moves ahead, especially in TradFi, where things can get even more intricate.
From a fundamental standpoint, NVIDIA’s results were about as good as it gets, especially after such a meteoric rise. The company reported 75% gross margins (down from 80%) and a 122% year-over-year increase in data center spending, driven by demand from tech giants like Microsoft, Google, and Meta. These are colossal numbers at this scale.
At around $120, I see NVIDIA as a screaming buy, given its continued earnings growth. My 12-month target is a conservative 50% increase, bringing the stock to at least $180, if not $200.
September has historically been a tough month for the markets, and I expect the S&P 500 will find it challenging to break into new all-time highs in any meaningful way this month. While upcoming rate cuts are generally bullish, there's a wildcard in the mix: if Kamala Harris performs well in her debate, her proposals—like taxing unrealized gains and raising corporate taxes—could counteract the positive momentum from the rate cuts. Essentially, her policies might act as a bearish force, offsetting the otherwise favorable conditions.
If you missed out on the August rally, September might just offer you a second shot at getting into the market before the year-end rally takes us to Valhalla. It's like the market's giving you one last boarding call before the final ascent!
THE AI UTOPIA
OpenAI is making headlines again, and this time, the buzz is about Apple Inc. potentially joining its latest funding round, which values OpenAI at around $100 billion. While this isn't a huge leap from its last valuation of $86 billion, having Apple on board would be a significant milestone. Microsoft already holds the title of OpenAI’s largest backer, with a whopping $13 billion invested so far.
CRYPTO
Government Crackdowns on Social Media:
Telegram's Pavel Durov Arrested in France: Released shortly after, this incident highlights a growing trend of government-led control over social media platforms, mirroring actions like Brazil's ban on X (formerly Twitter) under Elon Musk.
Continued Sell Pressure on BTC:
US Government Moves BTC to Coinbase: Approximately 10,000 BTC, worth $600 million and seized from the Silk Road case, were moved to Coinbase, likely for sale.
Mt. Gox Estate Distributes BTC to Creditors: This distribution adds further sell pressure on the market.
ETH Under Selling Pressure:
Jump Trading Offloads ETH: Significant sales by Jump Trading have contributed to the downward pressure on Ethereum prices.
SOL Faces New Sell Pressure:
Meme Coin Mania Shifts: As interest in meme coins cools off, some traders are moving to Tron and ETH, causing SOL to lose momentum.
Traditional Finance Expands Crypto Offerings:
Morgan Stanley's BTC ETFs: Morgan Stanley continues to push into crypto, offering BTC ETFs to its clients, which could create new demand in the market.
Pressure on Miners:
MicroStrategy’s Influence: As Marathon Digital raises $300 million in convertible senior notes to buy $249 million of BTC, following MicroStrategy's lead seems to be the best bet for miners under financial strain.
SEC’s Ongoing Crypto Scrutiny:
OpenSea Receives Wells Notice: The SEC continues its aggressive stance, serving OpenSea with a Wells Notice.
Ripple's Settlement: Ripple ends a multiyear legal battle with the SEC, settling for $125 million.
These developments in August set the stage for a potentially volatile period ahead in the crypto space, with significant regulatory pressures and market dynamics at play
THE MAJORS
Bitcoin (BTC) Analysis
Death Cross: The 50-day MA crossing below the 200-day MA indicates a bearish trend. Historically, this can mark a local bottom, but it's often a lagging indicator.
RSI: Currently at 42, showing some potential for upward movement but still close to the oversold zone. A similar scenario in September 2023 saw a local reversal, but RSI didn't drop as low this time, suggesting potential further declines.
Support Levels: Key supports are at $56K and $54K. A breach of these levels could indicate a deeper decline, with strong support at $50K.
Resistance Levels: Immediate resistance around $59.5K, with stronger resistance at $62.05K.
Ethereum (ETH) Analysis
Trend: ETH is also below key moving averages, reflecting bearish sentiment.
Support Levels: Immediate support is around $2.43K, with stronger support at $2.3K. A breach could lead to a retest of $2.2K.
Resistance Levels: Initial resistance at $2.52K, with stronger resistance at $2.7K.
Positive Indicators
Bitcoin Whales: An increase in wallets holding at least 100 BTC is a bullish sign, indicating that significant holders are accumulating.
Funding Rates: Negative funding rates can be a sign of bearish sentiment, but they also often precede potential reversals.
BlackRock's ETF Purchases: Significant purchases by BlackRock suggest institutional interest despite broader market selling.
BTC Held on Exchanges: A decrease in BTC held on exchanges can indicate accumulation and reduced selling pressure.
Summary
While the technical indicators suggest a bearish market for both BTC and ETH, the increase in Bitcoin whale wallets and institutional interest from entities like BlackRock could provide support and potential for future reversals. Keep an eye on the support levels and watch for any signs of bullish divergence or reversal patterns.
THE ALTS
Binance Smart Chain (BSC) Ecosystem
SOL LST Launch: The introduction of SOL LST (Liquid Staking Token) on BSC could enhance liquidity and attract more capital to the ecosystem. This move might boost Kamino and other related projects by increasing their Total Value Locked (TVL).
Robinhood Wallet Integration
Solana Support: Robinhood adding Solana (SOL) support could drive more mainstream adoption and increase SOL’s visibility. This might lead to increased interest and activity within the Solana ecosystem.
Sectors of Interest
DeFi: DeFi continues to grow with platforms like AAVE offering decentralized financial services. Kamino (KMNO) is also notable for its potential in the space.
AI: The AI sector is rapidly evolving, and tokens like TAO, IO, RNDR, and FET are making waves with their unique use cases and applications.
DePIN: This is a newer sector with potential for significant growth, focusing on decentralized physical infrastructure networks.
Token Highlights if you are New Here
AI Tokens:
TAO: Known for its decentralized AI and machine learning capabilities.
IO: Focuses on decentralized AI platforms.
RNDR: Provides decentralized GPU rendering.
FET: Aims to decentralize AI services and data.
DeFi Tokens:
KMNO: Aiming to leverage the DeFi sector with innovative financial solutions.
AAVE: A well-established DeFi protocol offering lending and borrowing services.
CRYPTO NARRATIVES
Tron vs SOL Memecoin Season
Justin and Tron army are pushing Memecoins on Tron led by $SUNDOG, my favourite for last two weeks. This touched $300n but is down a bit as $BTC sold off. I am also liking Tron as long as the season holds. Other interesting ones are SUN PUMP, $SUNWUKONG, $FOFAR, and $SUNCAT. These are very volatile so please be careful as Tron season could just abruptly end. Although my base case is that Justin will not let this die easily and this still has som legs.
Performance over the past 60 days for major memecoins:
$POPCAT: -1.4% - this one is an outlier., Any dips are to be bought
$MEW: -6.7%
$DOGE: -18%
$SHIB: -19%
$WIF: -28%
$FLOKI: -27%
$PEPE: -30%
$BONK: -30%
$MOG: -38%
$BRETT: -49%
As usual, NFA, DYOR and do share this newsletter.
May your Monday be filled with coffee & profits.
Our weekly newsletter reaches over 6,500+ readers.
Looking to Sponsor This Newsletter?
Please do not hesitate to message me directly on Twitter : https://x.com/HashtalkSankalp
You can also follow me on Twitter to stay updated on my journey!
Explore our Free Telegram Channel!
We've a Telegram channel where we daily market trends and alphas, share tweets, threads, and hot from the crypto space.
Join now and be part of our community : https://t.me/hashtalk1