Crypto Flows

Indeed a steady start with regards to crypto flows in Q1 2024 thus far. Today we had > 1 bln traded in the iShares Bitcoin Trust ETF. It's as clear as daylight to me that trying to fade these flows is going to lead to you getting your face ripped off. We haven't even seen rate cuts yet and any kind of turmoil would lead me to believe that crypto will outperform (due to the expansion of liquidity). My intuition suggests that this cycle is going to be a bubble cycle due to these flows and the anticipated participation of everyone and their dog. There is also potential for an Ethereum ETF this summer and I have my discretionary price targets this cycle where I will take some chips off the table where I feel we have reached "irrational exuberance". Let's see how this plays out and most importantly enjoy the journey.

 

My professional crypto macro journey going into 2024!

 

Its been a big macro year especially given the moves within the crypto space within this last quarter. 

 For transparency and authenticity, a snapshot of my equity curve within the crypto book is posted below as fintwit is a space with a lot of noise periodically. Initially I created my Coinbase account in Q1 2020 and put an initial investment into my account (thinking of it like a safety net, buffer, pool etc) Wasn't too sure of this space until Q4 2020/Q1 2021 where I dabbled within this asset class and put some money to work from my account. Hope I did it during the "covid crash" but just wasn't convinced. Hindsight is a great tool!

 Furthermore a lot of professionals were calling this space "shit coins" and "waiting for zero" etc and now one talking head is planning on creating a stable token!

 Even have had a professional talk about vol drag trying to discredit me on twitter. Its so important to be independent in the investing game and follow your own protocol as you are responsible for your own capital not some third party. Time horizon matters!

 Therefore I have been through a cycle already where my initial investments went to shit by the year 2022. However by having endurance and being a long term investor in addition to having dry powder I was able to deploy further capital and dollar cost average at the lows and  during the summer of this year. You can see how volatile this segment of the market is. My expectations are for 2024 to be a wild crypto year and wouldn't be surprised if new all time highs were hit in digital assets such as BTC, ETH, SOL etc given the liquidity dynamics and forward looking metrics. Feel its a big year ahead given the political nature in the US and liquidity being a fundamental driver of asset prices. We have the BTC halving and expectations about ETF approvals. BTC has a rhythm of doubling in price 6 months after the halving (April 2024) and we expect 20% to 30% corrections in the book but nothing similar to 2022 next year. No doubt there will be individuals who are resentful about this space but as the saying goes don't fight the trend. Price discovery will also be interesting. Indeed its been a fun and a roller coaster of an experience but I wouldn't change any of it. See you in 2024!
 

 

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Energy, technicals, oil

Just a quick note in regards to energy specifically relating to Oil. Below is a  chart and once the gap is filled my expectations are for oil to rally being majorly bullish this space. Enjoy!

 

 

 

Q1 2023 Macro summary

 Its been a while since I last posted and promise the next will be at more speed.

Financial markets have been quite choppy since the so called banking crises took hold starting with SVB simply due to rates. However the BTFP outlined by the FED helped to quell fears of bank runs.

Crypto has been an outperformer this year relative to other asset classes and the liquidity metrics prove this to be the case. Energy and precious metals also look interesting given the recent OPEC communication with regards to cuts and the more robust growth outlook which has underpinned the performance of silver. A softer dollar has also helped.

In my own portfolio I am waiting for Nat Gas at around the base line level of 2000 and then looking to buy in size. Its all about preparing for the next bull market.

 

 

 

 Will be interesting to see FED policy in May with a potential to pause but all the data suggests they might go for a 25bp hike and then nip it in the bud.

Hope everyone is enjoying the easter weekend and markets should be fun next week.

2020 and the US elections

Macro Analysis

 

Its been several years since I last posted so I dont think it will be that long this time around. Indeed 2020 has been a huge year for financial markets given the corona virus pandemic that has taken place. From having seen the fastest bear market in equities, negative oil prices and unprecedented fiscal support from governments to volatility at 2008 GFC levels. Its been a year of wild swings with a number of outsized options payoffs (*100) and structures (puts and calls) if you were lucky within the commodities, equities and volatility space. Always good to have lottery tickets within the long/short book. 

Going forward the next 1 - 2 years will be important for markets and the global economy with inflation rearing its head. Currently we are still awaiting the result of the US election where a Biden victory will ensue a non-friendly market environment even with fiscal support due to higher taxes, regulation and possible further lockdowns within the USA. Markets have initially rallied off this event but I think the smart money will fade this. A Trump victory and it's off to the races. Lets see how this plays out. See you on the other side!

Financial Markets analysis

Wow. Its been an incredible last few months for the financial markets where we have seen all time highs in the US equity indices as stated in my last post due to investors seeking a higher yield for their capital in addition to large capital outflows to the U.S. A variety of reasons include the uncertainty over Europe with regards to a resolution of the sovereign debt situation and the higher unemployment seen in countries within the EU (an example is Greece). Furthermore there has recently been unrest in various other nations (Turkey) which is starting to drain confidence in the EU framework. 

 In terms of a Macro perspective the fundamentals in the U.S are looking more robust where the NFP data has been steadily improving and consumer confidence reaching levels not seen for a number of years due to rising house prices and the 'wealth effect'. The dollar seems like the place to be and this is expected to strengthen substantially over the next 6-12 months. We have also seen incredible moves in the USDJPY currency pair due to 'Abenomics' where the Japanese have injected large sums of liquidity into their financial system to help weaken their currency in order to drive economic growth (making exports cheaper to foreigners) which has the smell of an underlying theme of currency wars.

US Treasuries yields have also risen substantially whilst prices have decreased (the price/yield inverse relationship) due to the rotation of investors out of bonds and into the equities domain. A low interest rate environment has helped as theoretically the price of borrowing is cheap but the likelihood of an increase in interest rates has increased (US fundamentals are more robust and the headline unemployment rate has ticked down) whilst simultaneously there should be a pickup in volatility. This should be over the summer and into the Q3 period as from a historical perspective there is a high probability whist also the German elections will demonstrate uncertainty and that is one element that financial markets have a disliking of.

Global Macro Report Summary

There has been a clear upward trend since the start of the New Year with equity markets rallying to new highs which haven't been seen for the past 5 years. There has also been a renewed confidence with an upwards tick in the ISM data in the U.S and in China in conjunction with the positive numbers seen in the Non Farm Payrolls data whilst simultaneously consumer confidence has really gathered momentum. Therefore we can say that this macro data is supporting the risk on rally even though U.S GDP in Q4 came in significantly low. We will wait to see what the Q1 data brings us to see if there is support for the upward trend. In addition the beginning of Q1 has seen a robust corporate earnings season where investors have been rotating out of bonds (due to the low yields) in to equities for a more attractive rate of return. Furthermore we have started to see JPY weaken significantly against the USD moving well over 1000 pips due to the 'currency wars' theme being played out in the price action. Just now looking for a correction in equities which happened in 2010 and 2011 then waiting for the markets to make new highs. Let's see how the markets unravel!