2022 05 08 YOLO Markets Weekly Recap
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Expect a muted market with eyes on the inflation data
It was an interesting week with the markets whipsawing post FOMC announcement of the 50bps hike that everyone is expecting. Part of the reason was due to the Powell speech post the announcement which lifts the lid on a few items. There is a low likelihood of a 75bps single hike but a 50bps hike is possible for the coming few FOMC meetings. This has resulted in the markets closing red for the week.
The Fed Futures indicate that traders have already priced in 50 bps hike for the next two meeting and an eventual 3–3.25% Fed rates by end 2022. The Nerdz reckons that this is slightly aggressive due to two reasons and will seek for favourable short term opportunities in the markets.
First, the supply chain issue is still creating problems for companies and individuals, contributing partly to higher inflation (cost push inflation). A tighter monetary policy i.e. aggressive rates hike is unlikely to resolve this issue and might exacerbate the higher cost incurred by firms which is likely to be passed down to consumers eventually. Secondly, US GDP contracted in Q1 22 which brought about the fear of a recession. A very aggressive rates hike to reduce demand pull inflation, while effective, could accelerate the likelihood of recession. This is not ideal given that we are heading into mid term US election in Nov 2022. Hence, The Nerdz believes opportunity could lie in such volatile markets but investors should be cautious as the general trend is likely to be to the downside.
Separately, the 7D Funding rate seems to be implying a bullish trend for BTC and ETH. The Nerdz will continue to monitor this metric and enter long position when appropriate.
Market decline continued with significant swings post FOMC
Market continues its decline amidst inflation and recession fears. FED issued the biggest rate hike (50bps) to 75–100bps while Jerome Powell dismissed the notion of a 75bps hike which quelled the markets’ fear heading into this. The market reacted positively post FOMC immediately as major indexes saw significant increase in prices. However, Powell did indicate that there could be a possibility of 50bps hike during the next two FOMC meeting.
This relief rally was short-lived though as the markets nose-dived, paring all the gains post FOMC on Thursday with fears of uncertainty on inflation and potential recession. This was despite the fact that the NFPR announced that US labour market condition remained strong, adding 428K jobs in April.
Crypto and DeFi TVL continue to decline too
With the Fed continuing its hawkish stance, risk-on assets like Bitcoin come under increasing pressure. And with no sign of inflation coming under control, investors are bracing for worse.
Glassnode tweeted a chart of the 7-day moving average of exchange addresses receiving Bitcoin. It showed a one-month high of addresses receiving BTC at 1,889,792. Sustained inflows would be a cause for concern for market participants. The chart below shows a steep uptrend of this metric from late April 2022.
Moreover, the total value of assets locked in decentralized finance protocols has dropped below $200 billion, continuing the poor performance which has seen the space lose over 20% of its value since the year began. Between the end of April and the beginning of this month, DeFi’s TVL dropped by roughly 3%. All major DeFi protocols like Curve Finance, MakerDao, Lido, Convex Finance, and Aave lost an average of 11% of their TVL within the last 30 days.
LGT offers BTC and ETH investments to clients
LGT partnered with SEBA bank to offer its clients direct investments in Bitcoin and Ether while providing custody services.
Ready Games aims to bring Web 2 gaming to Web 3
Ready Games is raising funds to develop a Web 3 mobile gaming arm to focus on incentivizing Web 2 game programmers to explore and switch to Web 3, while distributing games ‘as normal’ through traditional app stores.
Publicly listed crypto mining firms control 17% of Bitcoin total hash rate
The crypto mining industry is a quickly growing and evolving sector with publicly listed crypto mining companies controlling approximately 17% of the total hash rate of the entire Bitcoin network. In January this year, Core Scientific went public via a SPAC merger. Core Scientific’s hash rate leads all public companies with 8.3 exahashes per second (Eh/s), and it mined 5,769 BTC in 2021, generating about $545 million in revenue. Coming in second and third in terms of revenue are Riot Blockchain and Hive Blockchain Technologies, earning $215 million and $195 million, respectively.
Gucci and Starbucks latest to embrace digital assets
Gucci is looking to add crypto as a payment option in some of its U.S. stores from late May, with plans to expand the pilot to all its North American stores by summer 2022.
Starbucks hinted a plan of a full-fledged “Starbucks Digital Community Web3 platform” possibly tied to mobile payments in-store as well as a launch of a series of NFT collections.
Starbucks Teases Web 3 Platform in NFT Announcement
The coffee chain says its digital collectibles will likely be chain-agnostic and come with benefits tied to its…