OSL Trader View | Weekend Digest

Friday, July 10, 2020

Wow.  We’re now firmly in a world where the Fed outsources direct equity purchases to private for-profit entities,

And where the best investment advice comes from Instagram stars and TikTok “celebrities”.  The power of the crowd or herd mentality gone right? 


Regardless, we’re in a vicious neverending (and repetitive) story with the central banks continuing to do whatever-it-takes to keep the capital markets afloat and retail investors seemingly entrusting them to continue to prop these markets up accordingly.  Over this period, plenty of punters needed only to close their eyes and chuck a few darts at the board to be rewarded with some truly jaw-dropping returns. Meanwhile, professional investors have been hemorrhaging assets to the tune of $86B May 20 YTD (Source: Eurekahedge). It sure is tempting to get on these momentum trades, but with the 2Q20 earnings season kicking off, we can see the makings of a “snap back to reality, oh there goes gravity” moment just around the corner. The dismal earnings will amplify the inflated multiples these markets are experiencing. Long and wrong vs. the age-old adage: don’t fight the Fed… This cannot end well. 


We are starting to see the cracks emerge at the seams in other parts of the World. Investors in Zimbabwean stocks got a slap in the face as the nation’s bourse unexpectedly suspended trading as part of measures to stabilize the currency. 

Meanwhile, the Japan Government’s Pension Investment Fund lost $165B during the first quarter alone. The culprit? Equity investments both onshore and abroad.  Surely this won’t be the last as there is absolutely no way fundamental long-only shops will bite the bullet and pay 165x for AMZN US.

One of the side-effects of this has been a tamer volatility profile for king $BTC.

 

Relatively speaking, it has barely flinched. 

DeFi protocols have continued to attract assets, despite regulatory uncertainty as to whether securities laws apply to the protocols. As a matter of fact, collateral parked in cyberspace has more than doubled MoM with Basic Attention Token ($BAT) taking the jersey for the most farmed with $931M generated as gross 2Q20 transacted volume across all platforms exceeded $8B.



Virtual asset and traditional asset market participants expanded venues of collaboration: 

  • Didi Chuxing is expected to be the first private company to accept China’s DCEP
  • Travel app Expedia now accepts $BTC; 
  • Kraken’s subsidiary will be able to facilitate institutional clients’ derivatives trading by acquiring a Multilateral Trading Facility (MTF) license issued by the UK FCA; Arca Labs launched a US treasury fund on the Ethereum Virtual Machine, the first of its kind; 
  • Tata Consultancy Services launches cryptocurrency trading services;
  •  ING joined the Global Digital Finance; 
  • Coinbase begins procedure to go public in the US and; drum roll… the CFTC hints at more clarity for regulations governing digital assets in their 2020~2024 Strategic Plan. 

Telegram will be pulling the plug on its project on August 1st as the US SEC prevailed in its bid to shutter the doors on the second biggest ICO ever. The powers that be in New York state have also reignited the fire under iFinex- the company that manages Bitfinex and Tether ($USDT) demanding they stand trial regardless of whether they have jurisdiction for such a case. The current Administration has made it crystal clear on many occasions that if it ain’t “Made in America” they can, and likely will, shut you down. Even homegrown champs need to beware, such as the case with CENTRE- the company behind the USDC stablecoin- being forced to blacklist an address freezing $100K. So which is safer? An American stable coin with FDIC protection but subject to the whims of Uncle Sam, or USDT-the most ubiquitous stable coin on the planet trading $24B a day?  Maybe market forces should prevail.

Binance has continued with its shopping spree, the latest being an acquisition of SWIPE.io opening the gateway for Visa debit card holders to spend their crypto.

Cardano ($ADA) -2.7% pulled back from a +70% pop to test two year highs, briefly taking the #6 spot away from $BSV. The juvenile tendencies of #Faketoshi who can give but can’t take are well known, and quite frankly, it shouldn’t be a surprise if the +32% pop in $BSV (that came out of nowhere) was a result of his cronies lifting offers into the stratosphere to re-up. Cardano on the other hand got a lift from IOHK’s $20M cFund enticing more developers to contribute to the protocol where there already exists a vibrant development community following Shelly; the latest network upgrade. To top it off, Coinbase’s customers will be able to stake $ADA from within cold storage. 

It is a bizarre world we live in and with the recurring COVID-19 cases, not to mention the stronger strain that was allegedly discovered in Kazakhstan, we look to be one the eve of another global period of hibernation. Perhaps it’s good for the likes of Zoom and Netflix, but maybe less so for Japanese pensioners.  

 

Have a great weekend ahead.

 

OSL Trader View and Weekend Digest are contributed by Stefan Chu, SJ Oh, and Santiago Nazaretti

 


 

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