Insights and analysis for the professional investor Was this newsletter forwarded to you? Sign up here. |
|
|
Bitcoin (BTC) - $20,795.15 |
| |
|
Prices as of 11/04/22 @ 6:32 p.m. UTC |
Welcome to Crypto Long & Short! There was a Federal Open Market Committee (FOMC) meeting last week, so what else is there to write about except Federal Reserve Chairman Jerome Powell’s remarks and how the markets reacted? I guess I could talk about how dogecoin (DOGE) doubled in October? But I’d really rather not. So, instead, some brief thoughts on November’s FOMC meeting, volatility and maybe a little something about the subjective value of things. – George Kaloudis |
|
|
Bitcoin (Magic Internet Money!) Again Proves Less Volatile Than Stocks |
|
|
After the smattering of U.S. central bankers who set the Federal Reserve’s interest-rate benchmark met last week, the smattering issued a press release that outlines their new monetary policy (raising rates by 75 basis points). Then Powell, who leads the smattering, speaks at a press conference, giving introductory remarks before he answers questions from financial journalists. In our modern era of information overload, the market tends to react to the press release and then to the introductory statement and then to the answers to the financial journalists’ questions. So imagine my annoyance during last Wednesday’s November edition of “Fed Policy Makers Change Rates and Then Powell Talks About It.” Just look at the S&P 500 (which tracks the performance of most of the U.S. stock market) and how it behaved during the afternoon’s proceedings: It went up with the press release, down with the introductory statement and then down some more amid the questions from the press. |
Pendulum swing, swang, swung, knocked me across my face during Wednesday’s FOMC press conference (TradingView) Again: Imagine my annoyance. (Just picture a guy shaking his fist at a computer screen because of visceral market reactions due to another guy saying some stuff.) This is my take as to why this happened. The market was looking for any signal of the “slowdown” of interest rate hikes Powell hinted at a few rate hikes ago, and it found that in the press release. But when Powell started talking, markets reinterpreted what they’d just heard, especially because of this comment: “At some point, as I’ve said in the last two press conferences, it will become appropriate to slow the pace of increases, as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal. There is significant uncertainty around that level of interest rates. Even so, we still have some ways to go, and incoming data since our last meeting suggest that the ultimate level of interest rates will be higher than previously expected.” He was then later asked about “lag effects” (aka the time between the Fed’s rate increases and its actual economic impact) and Powell dropped the bombshell about it being premature to talk about a rate-hike pause. The S&P 500 puked. What’s more, the S&P 500 got whipped around even more than bitcoin (BTC) – you know, the famously volatile Magic Internet Money. The Fed press release came out at 2 p.m. ET. The S&P 500’s gain peaked at 0.7% about a half hour later, but it ended the day down 2.3%. Meanwhile, bitcoin peaked at a post-Fed press release gain of 1.3% and ended with a 1.5% loss.
Volatility has a specific definition, and two weeks is hardly statistically significant, but this marks the second week in a row when bitcoin’s relative stability showed the stock market who The Adult in the room was.
Read the full story here. |
Consensus is the world’s largest, longest-running and most influential gathering of the crypto, blockchain and Web3 communities. Join us April 26-28 in Austin, Texas, to learn, grow and build alongside innovators, brands, creators, investors and more. Use code CLS15 for 15% off your pass. Register now. |
|
|
Divisions in Sam Bankman-Fried’s crypto empire blur on Alameda Research's balance sheet. TAKEAWAY: Billionaire Sam Bankman-Fried’s cryptocurrency empire is composed of two main parts: his FTX exchange and his Alameda Research trading firm, both behemoths in their respective industries. According to a private document CoinDesk reviewed, Alameda had $14.6 billion of assets as of June 30. Alameda’s single biggest asset was $3.66 billion of ‘unlocked FTT,’ and its third-largest was a $2.16 billion pile of ‘FTT collateral.’ FTT is a token issued by FTX that grants holders a discount on trading fees on its marketplace. Read more here. Twitter has halted its plan to build a crypto wallet. TAKEAWAY: The social-media platform halted its plants to build a crypto wallet as part of the changes kick-started last week by its new owner, Elon Musk, online publication Platformer reported Thursday. Dogecoin sank around 10% at one point in the aftermath of the news.Read more here. Morgan Stanley reported that a record number of BTC has not been used for six months. TAKEAWAY: Bitcoin has traded in the tightest U.S. dollar range since late 2020, despite heightened volatility in other financial markets, suggesting “some traders are buying dips below $18,500 to prevent BTC falling materially below its 2017 prior cycle high,” the report said. A record 78% of bitcoin hasn’t been used in transactions in the last six months, and the level is increasing.Read more here. |
|
|
Podcasts Worth Listening To |
|
|
|
