I took a lengthy 3 week hiatus, as I just got back from traveling in Europe. While in Paris, I attended EthCC, though I only attended one talk as most of my time there was devoted to meetings.
A lot has happened since I left. BTC is up more than 10%, ETH is up more than 40%, the S&P 500 is up around 8%, the Federal Reserve hiked interest rates by 75 bps, an astoundingly strong jobs report came out, huge announcements regarding traditional institutions adopting crypto were released, the US technically entered a recession because of two consecutive quarters of negative growth, some disturbing facts about Solana were uncovered, and legislation was proposed in the Senate to classify ETH/BTC as commodities.
I will use this newsletter and likely at least one more newsletter to comment on most of these topics.
Risk markets across the board have been on the rise, with the narrative being that a Fed pivot is likely since many believe we have reached peak inflation. Commodities have been plummeting since June and the market believes that a decrease in headline inflation will allow the Fed to be more dovish in terms of raising rates.
Despite commodities decreasing in price and despite there maybe being lower headline inflation in the coming months, I still believe we are far away from inflation anywhere close to being at an acceptable level for the Federal Reserve to reverse their hawkish stance. Furthermore, since the US economy added more than double the amount of expected jobs (528,000 vs. 250,000) and year over year wage inflation increased to 5.2%, I think the Federal Reserve will feel that they have no choice but to be even more aggressive than originally planned.
In the last FOMC meeting, the Fed literally stated they will be data-dependent in terms of future hikes going forward. The data is definitely not signaling more dovish activity.
The market is having a difficult time adopting to the new regime in my opinion, and thus is overly hopeful in terms of returning to the accommodative conditions we have generally had since 2008. Even Arthur Hayes believes the Fed will pivot shortly in order to bail out our European and Japanese allies because of the strong dollar.
I don't, and I doubt the Federal Reserve cares more about Europe and Japan than the pressure they face from an increasingly manic Democratic party concerned about mid terms. Since I don't, I think there is more pain to come for both traditional markets and crypto. The merge hype is leading ETH to be a relative outperformer within crypto, but if the traditional markets sour, I do not think even ETH will be saved from the carnage.
I have not deployed any capital recently and am even thinking about moving closer to 98% cash.
Still bearish overall. I have never been strong at the short term wiggles, but I do not think we have seen the lows for crypto.