OSL Trader View — 19 September 2019
Jerome Powell succumbs to the twitter bombardments coming from yours truly and conducts the second rate cut of the year… or was it? Earlier on in the week, overnight repo rates had shot up into the stratosphere.
Thus forcing the New York Fed’s hand to spend (or should I say, print) $128bn this week alone to tame the $2tn risk-free treasury backed debt market. Sure it was the deadline for quarterly corporate taxes, Japan was off on holidays and $78bn of federal paper hit the tape but the fact that the boys club was paying multiples more for risk-free capital than I earn on my pennies in the bank is mind-boggling. To put it in perspective this is the highest levels since 2013 when the world thought the Chinese banking system would go under.
Back to Powell, sure he must’ve felt the heat from within and the pressure to step in line with his friends across the Atlantic (ECB conducted rate cuts, QE resumed and Draghi guided blue skies last week). But to hear Mr. Powell talk of “moderate” policy action to suffice for further US expansion was a bit too much to stomach.
And what is up with JP Morgan? First, it was interest rates and now its precious metals. Amazing how quickly their cheerleaders come to bat for them as former prosecutors calling the reference to Racketeer Influenced and Corrupt Organizations Act an overreach by the DoJ. “Thousands of episodes over an eight-year period” doesn’t even give the bank plausible deniability.
The reaction we saw in the crypto space was extremely interesting. It seems more and more, these markets are behaving like a legitimate alternative investment asset class on the riskier end of the spectrum. When shit hits the fan, you sell the pink sheets first and then move down the spectrum. You don’t put up your house up for sale. For a traditional money manager with any crypto exposure, it would be the first position to be adjusted.
Grayscale’s $2.4bn BTC trust tracking error widened vs. the OG because who else but Wall Street would pay 2% to get Bitcoin exposure and be subject to double-digit tracking errors. Brilliant assumption of fiduciary duties, best execution indeed.
We also had Hedera Hashgraph ($HBAR) debut to the public following the $127mn raise last year. Early investors were able to get in as low as 0.1c/HBAR, a whopping 100-bagger vs. listing price. 1.56bn tokens were released Monday and the good ‘ol Kimchi premium was back into play as we saw the HBAR/KRW market post a high of 54c, a near 60% premium vs. Liquid’s market.
The Upbit market printed nearly $30mn — 8x larger than the other lit markets combined- in the first 24hrs post debut as arbitrage traders pounced on the opportunity. It took less than two days for this premium to compress vs. six months when BTC top ticked at $20K end-2017. This is despite Upbit delaying deposits, conducting 5-minute auctions in the early hours of trade and capping offers at -10%. I would say these markets have run up the efficiency curve extremely well, in flying colors.
Libra is finding no friends with the establishment as Germany also joins the cacophony of politicians trying to bar the launch of the global stable coin as they see them “threatening state sovereignty.” Berlin sealed the deal by pushing through a strategy to block any other endeavors of the kind.
All the while millennials continue to warm up to crypto as Michelmores LLPs survey reveals 29% of them have a stake in the space as the distribution of existing coins continues to democratize. Deloitte is now letting employees pay for lunch in BTC and Spencer Dwinwiddie is looking to tokenize his $34mn NBA contract. #TheFutureIsHere. Werd.
May the trend be your friend… Happy trading!
