Seriously WTH. I’m sure by now you’ve digested your fair share of explanations as to what in the world happened — from insufficient storage to costs associated with physical delivery; and the fallout of Saudi Arabia, Russia and America. But for an asset this big to flip into negative territory, with the underlying re-engineered by barrels of ETF managers who weren’t able to reflect a value below zero (because equities don’t go below zero) makes this event a different story to decades ago. The average retail investor is the one to bear the full brunt of the impact though, seeing their seed money go to zero, lost in the gargantuan hole of a petrodollar.
Trump has filled his strategic reserves for pennies on the dollar, WTI June/July futures have bounced back albeit at subdued levels. The global freight train being out of action for a mere quarter has laid destruction to the industry. The exposure by our banking systems have been scaled back drastically from the weighting Oil and Gas debt had on their respective balance sheets, but it still ain’t zero.
Oil & gas is sexy and I want to be a part of it said no millennial ever. . Environmental issues are much closer to the hearts of this generation than those that have come before, so to hold this industry in low regard, following decades of spending billions of dollars to promote anti-environmentalism propaganda is more than fair. As for the professional money managers? Well, money talks and if these companies are willing to go out on a limb to deliver yield, however egregious the logic is, the income funds of the world will happily scoop these players up.
In a backdrop where Fed bailouts come in a don’t-pay-dividends package, Goldman Sachs is refusing to deal with companies with 100% white, male boards, could it be that the non-renewable energy sector has seen the last of its heydays? Whatever the result, hope this puts a lid on shale gas, fracking and all these other extraction methods. These “old white dudes” may have done to their Board chances as they’ve laid waste to the lands that enriched them — left barren.
CME futures got a boost from Renaissance Technologies, the legendary quant fund that has been killing it since inception, as it was revealed they’d been cleared to trade $BTC futures in a form ADV filed at the end-March. The news caused open interest to recover monthly highs. At least 80% of the top 20 players in bulge bracket IBs are low touch and RenTech is the king of them all. Surely this must have triggered some FOMO across the HFT/quant fund space…
While more than 43,000 millionaires get a $70B break from the Coronavirus Aid, Relief and Economic Security (CARES) Act, the average American benefited from a measly $1200 cheque gifted to them by the US government- and many it seems sure jumped on the FOMO wagon as per a now deleted Coinbase CEO Brian Artmstrong’s tweet reporting an uptick in $1200 deposits, the exact amount the cheques were cut for. Awareness of crypto has been climbing slowly, but surely. As per the latest economist survey, “Cryptocurrency awareness in developed economies reached 79% (92% in developing ones).”
Asian governments continue to show one up against the Americans: Singapore has opted out of their cut from airdropped crypto and as the PBoC confirms the closed circuit pilot projects in Shenzhen Suzhou Xiong’An & Chengdu, they’ve hinted at aspirations to roll out the DCEP and have it available before the 2022 Winter Olympics. Sensing the laxer regulatory environment, private companies are taking these cues to push their own respective crypto boats out, the latest being ICBC issuing a white paper on their blockchain capabilities; the first of its kind from a commercial Chinese bank, let alone one of the top four.
As ironic as a centralized custody solution for a decentralized digital asset sounds, I find it difficult to see how any professional money manager would opt for the latter and the ongoing hacks underline the point. DeFi lending platform Dforce saw their $25mn assets on platform emptied, only to see it returned in full a week later as the hacker realized his IP address had been exposed. They allegedly suffered the same attack a’la DAO 2016. There was another straight up ponzi in the EOS ecosystem inwhich an EOS wallet provider just called it a day snatching the $52mn in EOS on balance, and yet another failed attack on PegNet. DeFi is still a concept being tested. Looking for an insured, trusted, battle-tested custody solution?
Geopolitical strife is serving as a painful reminder that government fiat can and will be less than paper if it is mismanaged. Demand for bitcoin in Argentina has exploded as the country is on the brink of a ninth sovereign default while Binance offers a Venezuelan Bolivar (VES) onramp to the citizens of the banana republic. If I had to choose a contrarian investor to trump them all, it would be Nassim Taleb, the author of The Black Swan and the man just put out a tweet urging Lebanese to resort to BTC as the government drains the wealth out of her people.
The US senate just approved another $484bn for COVID relief on top of the existing $2tn and the UK government wants to dish out a £1.25 billion (US$1.53 billion) rescue package for high-growth businesses. You’ve all heard that one guy say we don’t really need crypto in developed countries, true the guys pulling the trigger on the printing press have quite literally unlimited resources but surely this cant go on forever… Them threads on that emperor looking mighty thin…
And if that fails, well, no money no honey and all these income funds are going to have to have a serious look at their portfolios because it seems like both banks and the oil&gas companies will be tighter with these unsustainable gifts. HSBC & Standard Chartered, and now the RBI stepping in.
There’ve been a ton of awesome developments in the space including Coinbase’s participation in DeFi via their Oracle, Facebook on their Libra, Algo joining the Wall street Blockchain Alliance, et al. The one stat that made my day was the number of ethereum smart contracts deployed in March 1,971,632 +75% MoM at an all-time high. While the detractors will surely scream it was a result of a drop in cost to deploy the smart contracts, I’ll take it. Keep BUIDLing, #BuyBitcoin.
May the trend be your friend… Happy Trading!
