Jun. 7 Markets Report: The Fed Said Hold On Tight

Jun. 7 Markets Report: The Fed Said Hold On Tight

Elon Musk is making headlines again (what else is new?), insider trading has reached the NFT world, and startup funding is at an 18 month low.

Jun. 7 Markets Report: The Fed Said Hold On Tight
Darry Port

Updated Jun 24, 2022

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Macro

Russia Aims at New Targets

  • As of June 2, Russia controls 20% of Ukrainian territory.
  • The US has agreed to send $700 million in aid, including the American High Mobility Artillery Rocket System (HIMARS), to Ukraine. 
  • In a TV interview, Putin responded warned that Russia will respond to this by striking at “facilities we are not targeting yet."

The Great Tightening Is Upon Us

  • The U.S. job market had another strong month, with nonfarm payrolls rising by 390,000 in May. The Leisure and hospitality industries saw the biggest gain in jobs at 84,000.
  • The Fed has begun the process of Quantitative Tightening (QT), reducing its $9 trillion balance sheet by $47.5 billion per month for the next three months. This QT will likely drive up bond yields and prompt another stock market sell-off.

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Source: FRED

Stocks 

You’re Hired. Oh, Wait. You’re Fired.

  • Stocks experienced a slight boost this week on improved investor sentiment around the US job market and global supply chain. 
  • China is gradually reopening its economy and could hopefully be operating at full capacity within the next month or so. What’s more, Chinese regulators are apparently ending their crackdown on ride-hailing giant Didi, which bodes well for tech stocks. 
  • As mentioned above, the US job market is currently performing better than expected. Despite this, high-growth companies like Tesla, Coinbase and Gemini have all had to lay off 10% of their staff and enact hiring freezes as of late. Coinbase, in particular, has faced a lot of backlash for revoking recently accepted job offers.
  • Investors are now looking toward the latest US inflation reading at the end of the week. If May’s CPI (Consumer Price Index) comes in slightly lower than April’s, it would signal that inflation has indeed peaked.

Sector Breakdown

  • Energy: 1.18%
  • Industrials: 0.04%
  • Health Care: -3.14%
  • Real Estate: -2.23%

Elon’s Rough Week

  • Not only is Elon Musk being sued by Twitter shareholders for market manipulation, but the Stop the Deal campaign is now aiming to block his $44 billion Twitter purchase.
  • The campaign is waging war on multiple fronts, including asking advertisers to pull their money from Twitter and pressuring government agencies like the SEC, CFIUS and FTC to block the deal. 
  • Elon probably isn’t getting any love in the workplace either. Last week he demanded that all Tesla and SpaceX employees come back to work in-office or resign. 

Bonds & Mortgage rates

Rates Going to the Moon

  • US Treasury yields have continued climbing over the past week, with the 10-year and 30-year notes hitting 3.036% and 3.191% respectively. 
  • With the US 10-year getting close to the 30-year note, we might soon see another yield curve inversion — a semi-accurate recession indicator.
  • After mortgage rates plummeted to 5.25% over the past few weeks, the 30-year fixed-rate came back roaring at 5.44%.

Crypto

The HODLers Have Not Left

  • Bitcoin ended its 9-week losing streak on the 30th of May and has been holding steady since — up 1.98% in the last 7 days. But we’re not quite out of the woods yet. Going forward, BTC’s price action is still tethered to the macroeconomic forces of inflation and quantitative tightening (QT).
  • Crypto’s fundamentals are still majority bullish though, with the number of Bitcoin addresses holding 0.01+  BTC recently hitting a new all-time high of 10.088 million. Similarly, Ethereum addresses holding 1+ ETH have hit a new all-time high of 1.48 million. 

C’mon Man, Not Another PoW Ban

  • The New York State Senate recently approved a controversial proof-of-work (PoW) mining ban bill that would prohibit any new mining operations in the state not using 100% renewable energy.
  • The bill still has to be approved and signed by the governor in order to be put into effect. The cryptocurrency community is, naturally, up and arms over this bill. 
  • Ethereum co-founder Vitalik Buterin recommended that governments implement carbon pricing as an alternative to banning PoW mining. Charging miners a fee for gas emissions would, in turn, provide the government with additional revenue. 

Will USDD Win the Stablecoin Race?

  • Solana suffered its second outage in a month, prompting all the more investors to sell their SOL tokens.  
  • Tron’s USDD stablecoin is now collateralized by over 200% and $1.37 billion in cryptocurrencies. This collateral ratio is almost double that of the time-tested decentralized stablecoin DAI. 
  • According to a newly released Federal Trade Commission (FTC) report, over 46k people have lost $1 billion+ crypto scams since 2021. 

NFTs & Metaverse

Top NFT Collections

  • Goblintown.wtf: $32.2M
  • Bored Ape Yacht Club: $16.8M
  • We Are All Going to Die: $10.4M
  • Boki: $9.29M 73.62%

The NFT Market Trades Sideways

  • While the total value of the NFT market hasn’t moved much in the past week, total volume has seen a +21.37% to $418,946,715.62.
  • The top NFT sale this week belongs to Bored Ape Yacht Club #7725 at 189.9 ETH ($359.28k)

A New Class of Metaverse Criminals

  • In a landmark case for the digital asset industry, ex-OpenSea employee Nate Chastian is currently facing 40 years in prison for insider NFT trading. 
  • Chastian allegedly used privileged information about which NFT collections would be featured on the OpenSea home page to buy those collections in advance and cash out during the listing. 
  • Last week, the Discord servers for Bored Ape Yacht Club (BYAC), Otherside and other Yuga Labs collections saw yet another phishing attack. According to on-chain analyst OKHotshot, investors have lost over 145 ETH ($260k) thus far.

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Source: OKHotshot

Ye is Coming to Play in the Metaverse

  • Gala Games’ GRIT, a Wild West-themed NFT game will be launching on Epic Games Store. 
  • Steve Aoki’s has the most valuable celebrity NFT portfolio for the month of May, worth $8.8 million.
  • Kanye West’s has filed 17 trademark applications under his Yeezus brand, with some of the filings mentioning “non-fungible assets” and “metaverse experiences”. 
  • Binance has announced that it will be sponsoring The Weeknd upcoming After Hours ‘Til Dawn world tour, with the crypto exchange stating that they will develop an NFT collection around the tour.

Commodities

Screw Your Protection

  • At the outset of Russia’s Ukrainian invasion, worries about sanctions on Russian nickel exports caused prices to spike to a record $100,000 a tonne in two days. The London Metal Exchange (LME) responded by canceling US$3.9 billion of trades. 
  • As a result of their trade cancellations, New York hedge fund Elliott Management is suing LME for $456M. LME, however, defended its decision by saying that it needed to protect the market. 

You’re Better off Carpooling

  • The US cost of gasoline has reached a new all-time high of $4.86 per gallon. Ten states now average over $5, with California currently standing at $6.34 per gallon.
  • The Organization of the Petroleum Exporting Countries (OPEC) has agreed to increase production by 648,000 barrels per day in July and August to combat the Russian oil supply shock.
  • While the commitment to hiking output is a good thing, OPEC has been struggling to meet production quotas lately. Not to mention, the proposed 648,000 barrels per day still won’t make up for the loss of Russia’s 1 million+ barrels per day. 

Collectibles

Are Your Holdings Recession-Proof?

  • In our latest study on the top-performing asset classes during market crashes, we found that luxury collectibles like art, wine and whisky came out ahead.  One theory behind their resilience is that the ultra-wealthy investors who tend to hold these assets are less likely to cash out during economic downturns. 
  • Check out the full study for more insights into how other assets like commodities, stocks, bonds, crypto and sports cards behaved during the 2018-2022 market crashes. 
  • Luxury watches have been taking quite the beating lately, with Timepeaks’ Luxury Watch index dropping from $608,358 to $596,727. Used Citizen, Grand Seiko and Used Chanel are among the biggest losers in the index.

Million-Dollar Bottles

  • The Rare Whisky Icon 100 Index traded +0.79% higher for the month of May. 
  • This index includes highly sought-after bottles like Ardberg Provenance 1st Release, Glenlivet Cellar Collection Bottled 2000 and Talisker Bottled 2006. 

His Airness Is Back Again

Startups

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Source: Crunchbase

VCs Become Stingy

  • Global venture funding reached $39 billion in May. Sounds like a ton. But as you can see in the image above, global venture funding has been trending down for most of the year. This is also the first time since November 2020 that funding has dropped below $40 billion.
  • According to Crunchbase, late-stage companies have been most severely impacted while the monthly average for seed funding has actually increased 11% YoY to $3.1 billion. 
  • The largest startup funding rounds this week included:
    • Financial services provider, Acrisure: $725M
    • Therapeutics developer, Upstream Bio: $200Ms.
    • Upskilling platform, Guild: $175M.

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Source: Crunchbase

A Record-High in Unicorns 

  • 34 new companies joined The Crunchbase Unicorn Board in May, worth a collective $57 billion with $8.3 billion in funding. Of those 34, the regional distribution is as follows:
    • US: 20
    • Asia: 5
    • Europe: 5
    • Latin America: 3
    • Africa: 1
  • The Unicorn Board, consisting of over 1,300 companies, is now valued at $4.6 trillion with $770 billion raised.

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