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The Macro Situation
The Fed’s efforts to ensure economic stability hit two unexpected snags. After plans to guarantee deposits for SVB, two international events renewed an atmosphere of anxiety and fear:
- one of Europe’s largest banks – Credit Suisse – revealed solvency issues due a combination of bad events; and
- the European Central Bank announced a 0.50% rate increase a day later.
The Swiss National Bank has, however, agreed to a loan of $54 billion USD to help keep Credit Suisse from going belly up.
Despite this and a similar rescue of First Republic, markets remain cautious. The Fed is now under pressure to navigate between a Scylla and a Charybdis:
- breaking inflation with an increase in interest rates; or
- pressuring more banks with liquidity problems by draining value from long-term investments.
Economists are now betting on a 0-25% increase in rates for March. But 25% looks almost certain given Larry Summers’ statement that the inflation reduction course needs to stay on track, while not breaking the midsize and regional banks.
Stock Watch
Macro-Dependent:
- Long-term US Bonds (TLT, IEF)
- Gold (GLD), Silver (SLV),
With the initial pricing-in of a 50bps hike for March last week and the Fed having to pullback due to the banking crisis this week, long-term bonds may be under-valued. Future increases will also be under doubt, further bolstering the prospect of long-term US treasury holdings.
The US dollar index dropped below 104 on Friday, and according to the same logic about a Fed pullback, GLD and SLV will continue to benefit as hedges and safe havens.
Crypto Watch
Crypto Tickers to follow:
- “Battle of the Stablecoins” Narrative: FXS
- “Bank Safety” Narrative: BTC, ETH
- “Hedge” Narrative: PAXG
- “AI” Narrative: AGIX, OCEAN, FET, MDT
- “Own The Casino” Narrative: GMX, GLP
With the scare over USDC’s exposure to SVB, Tether has increased its market cap to $75B. The flurry of activity last week benefitted arbitrage traders as USDT almost hit $1.03 on March 10.
Even though correlated to the financial market, BTC continues to perform well due to development of its utility network and acting as a potential hedge against other traditional assets. On that note Fidelity is now open to BTC and ETH trading, continuing the wider adoption of cryptocurrency by financial institutions.
ETH is entering a “buy the news” phase with expectation of its Shanghai upgrade next month, which will allow validators to withdraw staked ETH. The upgrade has been pushed back from March to mid-April.
The larger macro situation has meant that Paxgold is following GLD’s trend. While AI coins have been affected, they are demonstrating their resilience with counter-cyclical gains. MDT is one of the lower profile coins whose aim is to provide a market for data providers and buyers. See AOTB’s recent Quora post on MDT’s 10x potential.
-Todd Mei, PhD and Sebastian Purcell, PhD
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This newsletter was created by The Art of the Bubble/1.2 Labs and is provided for educational and entertainment purposes only. You should expect no financial returns one way or another based on the statements contained herein.Robin Technologies and Analytics LLC is the firm that distributes The Art of The Bubble products. The firm does not provide individually tailored investment advice and does not take a subscriber’s or anyone’s personal circumstances into consideration when discussing investments; nor is Robin Technologies and Analytics LLC registered as an investment adviser or broker-dealer in any jurisdiction.
