Mine Newsletter - Digital Assets and Traditional Markets
March 1, 2020
Posted in:

Mine Newsletter – Digital Assets and Traditional Markets

SHARE THIS
Share on facebook
Share on twitter
Share on linkedin
No data was found
Our weekend update on digital assets and traditional markets
Don’t Shrug!

First cab off the rank today is Bitcoin,

Last week we thought that Bitcoin ‘looks primed for a stop-hunt to the downside…putting 17 days of new long positions out of the money…being capable of falling and maintaining a long-term bullish view‘.

This week we saw the price decline where BTC is sitting on a trifecta of significant technical points. The asset is just below its 200 day moving average, at 50% discount to the high and is also sitting on its trend-line. At the same time, Bitcoin is up 30% from its lows.

Some commentators have been wondering whether Bitcoin is a risk-off asset or not, and it has acted as such from time to time. One issue with this is the nature of the Bitcoin market, which becomes extremely leveraged and also goes through de-leveraging at a similar rate. The medium or long term prospects are lost into short-term market structure, highly leveraged, dominated by traders and pushed to extremes.

Something similar likely happened to Gold Friday, falling almost 5% in what looked like a general de-leveraging event. There is not a great deal to be gained about Bitcoin as a safe-haven or Gold in the short term event.

Something else we mentioned last week was that digital assets are not ready to take anything over and that there could be significant and unusual price pressures, especially in financing agreements with banks now looking at their risk in a new way.

There’s been an interesting coincidence or event in spot volumes today compared to last week. Wednesday has been the highest volume each week in the last month, and a pattern of declining volume coming into Saturday each week as well. A closer analysis would have to take a better look at the underlying data, and it would be interesting to compare to any pricing bias over the 4 days.

The Fear & Greed Index for Bitcoin is in fearful territory. If we were to trade here we would consider a long but be aware that the macro-story will likely fundamentally change today.

There has been some interesting volume in USDT with its $4.5 billion USD market-cap doing $70 billion USD in volume Feb 27th! This record for the asset was on a day where the volume for the entire digital asset space was around 60+% of the market capitalisation!

This may be the influence of traditional finance using USDT as a reserve currency for activities in digital assets and potentially capital flight from China. There is not a lot to learn from the top 5 exchanges trading USDT but Tether daily volume has increased steeply starting from December and throughout the Bitcoin rally.

We have also seen cases of alt-coins moving before Bitcoin several times recently perhaps demonstrating more confidence in the space. It may be direct investment into individual projects or if institutional investors are moving money into portfolios of digital assets, low liquidity assets are likely to show up with the flows first.

And not even the digital asset space is fully removed from the ravages of the coronavirus – the corona token was launched with its abysmal graphic.

CoronaVirus

It was the start of parabolic growth last week that had us convinced that the Coronavirus would ‘be significant in the upcoming fortnight, especially in the context of being unable to control it.’.

The super-infectious disease was originally estimated to have an R0 of 3.8 via Chinese figures, although another gut-shot from Singapore estimated a figure of 5 (the ordinary flu is about 1.6).

The Acting Deputy Secretary Ken Cuccinnell noted that John Hopkins university put their data on the virus behind a paywall – actions have been taken in the US to avoid panic, where Costco is apparently having a great week.

Traditional markets

The S&P 500 ended up doing about 13% in an almost straight-line drop last week. We had briefly covered the drop in economic activity due to virus quarantine, which ended up being reflected in the Chinese PMI figure of 35.7, the lowest of all time for February. Electricity consumption and coal purchasing had been particularly low in China.

The markets were maximally long in call options at the high and we suggested that out-of-position options traders + structural and other factors suggested that ‘the market is severely out of position in the event of a selloff‘.

With Gold dropping 5%, we must conclude that a concrete shift in bank risk policy has been effected and that the later half of last week included a de-leveraging event in traditional finance.

Politics

Although there has been a series of similar tweets, it hadn’t taken too long for this one to evolve into the fastest 10% stock market decline of all time!

Unfortunately for the US President, if you want to own the gains you’ve got to own the losses. Remarkably, instead of setting up coronavirus as a patsy on this one, the Trumpster has suggested that fears were overblown, that it could or would be under control (no evidence that this is possible, especially without crippling the economy). The media has attempted to pin on him a statement that the coronavirus itself was a hoax.

We noted earlier in the week that the timing was favourable to the presidential run of the communist Bernie Sanders (although somehow bumbling Biden, who promised to raise taxes to his supporters recently, won in South Carolina).

In any case, a fiscal stimulus is likely to be pushed by the White House as early as today, and certainly some type of action into next week because the delusion of control over markets demonstrated 7.42am Feb 19, 2020 will continue into March.

It will be hard to see how this solution does not start inflation.

Geo-Politics

Last week we speculated that Turkey’s Erdogan had a problem with Russian troops in his backyard – that Imperial powers often prefer weaker, more unstable and amoral partners – potentially to keep the relationship simpler (until it isn’t!). Russia’s support of Syria’s Assad is based in a fantasy of the USSR with a materialist strategic political approach that includes oil and guns in the form of Oil, Gas, S-400, scramjet missiles and political assassinations.

Inviting gangsters to your backyard never seemed like a good idea to start with, and now there is an international incident that sees Turkey the NATO member with a US Nuclear base having dozens of its soldiers killed in a Russian airstrike. Russia is sending missile frigates next-door to Syria as a response.

In fact the two countries have historical wars to look back on and both Putin and Erdogan prefer to promote history as opposed to inventing a new one.

Russian warships in the Mediterranean is a strange concept – but with Russian troops in Libya with some type of Turkish involvement reported as well, the EU has significant problems on its hands, but potentially a break-down in the Russian plan to control the European energy supply.

A violent rejection of EU immigration policy is also going on in Greece at the moment, which should be taken as part of the international populist movement reacting against globalist politics. A delicious irony that is waiting in the wings on this one is that the global rejection of globalism is a rose by any other name.

SHARE THIS
Share on facebook
Share on twitter
Share on linkedin
Featured

The Sunday Shill Vol. 3

A pure shill This is my third Sunday Shill and I still have not done a straight-up shill. The first Sunday Shill was post-Friday the

Read More »
Knowledge

The Sunday Shill: Vol 1

The most ‘based’ overview in crypto. It is not the most glamorous week to start a weekly article called “The Sunday Shill”, but I have

Read More »

Before you go...

Never miss a thing! Sign up to
The Knowledge Mine Digital’s newsletter on all things Crypto