Friday July 31, 2020
The unprecedented liquidity injection by the US is leading to some serious mis-allocation of capital. I mean what did they expect? Pantera has pointed out that the Fed has printed more Benjamins in June than the first two centuries of existence.
Following the biggest QoQ drop in quarterly GDP print in 83 years (2Q20 -32.9%) and yet, they remain trigger happy.
With dovish guidance setting the tone, the alphabet soup concoction of support measures has just been given a three-month extension to continue through the end of the year. So what are they doing with the Benjamins?
Section 13(3) of the Federal Reserve Act has authorized:
- Secondary Market Corporate Credit Facility — NY Fed, via SPV to buy secondary market corporate debt (Individual corporate bonds, bond ETFs & Index tracking bonds by american issuers, 1.5% weighting max, or 10% outstanding. $75bn from Fed; levered 10x; Total $750bn. a.k.a. Primary Market Corporate Credit Facility (PMCCF) ~ deadline 12/31/2020
- Main Street Priority Loan Facility. the Main Street New Loan Facility (MSNLF), Main Street Expanded Loan Facility (MSELF) , loans to SMEs 15K employees > or ’19 revenue, 5yr maturity first 2 yrs interest payment deferred. $5bn>.Federal Reserve Bank of Boston to buy out 95% of the Eligible Loans. $75bn commitment from the Treasury pulling cash from the Exchange Stabilization Fund under section 4027 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), total size $600bn.
- Money Market Mutual Fund Liquidity Facility. Boston Fed will lend to US Depository Instos, US Bank holding co’s, US branches and agencies of frgn banks eligible under the facility 3/23/2020~ @ primary credit rates. non-recourse LOANs; $10bn
- Term Asset-Backed Securities Loan Facility (TALF). $10bn from NY Fed in SPV. Total size $100bn, 3yr loans non-recourse. Eligible collateral: Auto loans & leases; Student loans; Credit card receivables (both consumer and corporate); Equipment loans & leases; Floorplan loans; Premium finance loans for RE & casualty insurance; Certain small business loans that are guaranteed by the Small Business Administration; Leveraged loans; commercial mortgages @ 80~95% LTV.
- Paycheck Protection Program Liquidity Facility for Depository instos/credit union; community development financial insto. Member of the Farm Credit System, Small business lending companies & others
- Primary Dealer Credit Facility. For Primary dealers of NY Fed get 90 day loans.
- Non-Profit Organization New Loan Facility. $600bn
Needless to say, this has boosted safe haven assets including gold, to an all-time high. Analysts, including Goldman Sachs, reckons gold is just hitting its stride with a 2300/oz target price expecting the trend to continue hinting of a potential paradigm shift away from the petrodollar’s supreme reign. We’ve all witnessed $BTC’s vaulting heights this week too, and the fires being stoked by new entrants to the market… an added sign that portfolio managers are diversifying into alternative assets and redeploying some of their equity profits they’d enjoyed through the Benjamin offensive (aka stimulus action).
Crypto has also benefited from investors seeking protection against inflation. Various exchanges popped the champagne on record volumes,
Following the FOMC meeting, $BTC has popped above resistance.
The bulls have literally bulldozed through the exorbitant funding rates on Bitmex.
And the lions’ share of options volumes has been bullish.
And as alluded to earlier, we’ve been seeing more new entrants (new addresses) to the market and equally as encouraging to see are the number of active addresses continuing to tick higher suggesting broad based support.
I’ve been getting a lot more pings from peers and ex-colleagues in the traditional banking world — and they want in. For PA trades, most banks require a mandatory holding period of at least two weeks and given how fickle these market moving millennials can be and not to mention eye-watering valuations, you would need a some big cahonas to get into these markets without having an escape route to cut your losses at the first hint of a pullback. Some of these folks are getting exposure through Grayscale’s GBTC at a 22% premium..
So a lot of these folks have begun actively looking into $BTC and other digital asset investments to support their personal portfolios — especially given the banking level of compliance and reporting standards that OSL offers — to bring to their compliance departments and put them at ease that the interests of their brands (and I guess their staff) are protected. But moreover paving the way for a savvy group of executives to have at least one more avenue to capture the markets without the burden of the mandatory holding periods associated with securities.
I am a perennial bull, hence my job in the space but at this juncture, suspect a pullback with over 90% of holdings allegedly ITM at these levels (as per Glassnode) before we #GoToTheMoon.
Ethereum has outperformed $BTC by a significant margin as we inch closer to the 2.0 hardfork.
The Ethereum foundation has stoked the fires by unveiling a validator launchpad.
The elevated levels of activity on has certainly benefited Silvergate Bank (SI.US) which reported an 80% increase on the nascent bitcoin collateralized loan offerings; $5.5M NP +25% QoQ as they cleared $22.4B transfers during the quarter. The contrast vis-a-vis the commercial banks could not be more striking as many of the banks report NPL provisions that eclipse their bottomline by a significant margin. The spike in volatility managed to have the trading desks bring up the rear and, for many, were the only reason they stayed out of the red, but seriously, why would anyone park their wealth with them for a paltry 1% APY? And needless to say, traditional banks haven’t exactly been welcoming with open arms for fellow crypto players, slapping them with arbitrary fines, accounts frozen- in some cases months- without any explanation. Very much look forward to seeing how the BLINC initiative pans out. Spearheaded by BCB Group, they have released an alternative to the cliquey boys club of a rail a.k.a. SWIFT. Needless to say, they will have abundant support from the crypto community.
One thing for sure, millennials aren’t banking with the dinosaurs. While Maker DAO made history taking the mantle as the first DeFi project to hit the one billion milestone, #ETH witnessed 3.1mn contract calls last Saturday, an ATH as volumes on the dEx’s continue to trend top right. Additionally, YFI has been so successful that its sprouted a step-brother of sorts as a Chinese entity launches a similar (read identical) project called…. YFII. #NoShame
But there is still a lot more BUIDLing to be done. Indeed, we have come a long way but scams are all too common and without regulation, it will remain so. The soap opera at Bitmain continues as 10,000 Antminer’s from their mines were stolen and Zeus Capital- the author of a scathing report on Chainlink- has allegedly been paying influencers to spread the FUD causing $LINK to pull back from ATHs. Even some of the industry leaders need to get their act together, case-in-point Binance as they quietly remove their native token $BNB from the top of the Defi token rankings after a barrage of criticism. C’mon now…
The massive $5.7bn overhang from the PlusToken scam has been put to bed as all 27 primary suspects and additional 70+ more persons involved in the scam were thrown behind bars. Thank you Covid…
The announcement by the Office of the Comptroller of the Currency permitting crypto custody by US banks has lit a fire at other countries as the race is clearly on. The BoJ has made the digital yen a top priority while the Bank of England attempts to retrofit CBDC transfer capability on their antiquated RTGS payment network. First they laugh at you…
- Polkadot ($DOT) raises 3982.07 $BTC in second raise @ $125/DOT in 72 hrs and proposes to increase supply 100x through the first token-based vote
- Twitch begins accepting crypto as legal tender. With a discount!
- 120K $BTC hacked from Bitfinex in 2016 is on the move
- FiCAS AG lists world’s first actively managed Cryptocurrency ETP Bitcoin Capital Active (BTCA; ISIN CH0548689600)
- Cardano ($ADA) successfully migrates to Shelley mainnet attracting 500 Stake pools
- Liquid exchange delists privacy tokens as they apply for the PSA license in Singapore.
- Binance begins shipping crypto debit cards.
- Ripple ($XRP) unveils beta version of a P2P payments platform a.k.a. Payburner.com
- FTX releases whitepaper for Serum, a decentralized exchange on the Solana ($SOL) blockchain.
- A1 Telekom Austria Group the country’s largest telecom operator accepts crypto as legal tender.
- Europol’s No More Ransom decryption tool repository continues to fight against hackers.
- Aave ($LEND) to migrate to genesis governance i.e. fully autonomous.
- Binance launches AUD onramp.
- Iran approves industrial power plants to operate as Bitcoin miners
May the Trend be your friend… Happy trading!
Daily commentary and more from OSL available here