Friday, July 28, 2023

“The whole of life is just like watching a film. Only it's as though you always get in ten minutes after the big picture has started, and no-one will tell you the plot, so you have to work it out all yourself from the clues.” – Terry Pratchett  ||

Hello all, and happy Friday!! I hope that you have some relaxing things planned for the weekend, because I don’t know about you, but I find this low market volatility strangely stressful. Summer is supposed to be quieter, I know, but even so, this is unusual.

Oh, Scott Melker kindly invited me onto his Wolf of All Streets show yesterday to discuss crypto and macro markets, including why the crypto prices are not reacting to the steady progress on adoption and regulatory clarity. As always with Scott, it was a lot of fun – you can see the episode here.

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Programming note: Due to a conflict, I won’t be able to publish the premium daily newsletter on Monday, July 31, apologies! Back in your inbox on Tuesday, August 1.

WHAT I’M WATCHING

Japan’s shift. The BoJ earlier today surprised the market with an adjustment to the tolerated band for 10-year government bond yields – rather than hold them firm below 0.5%, that bar becomes a “guideline” and the yields could move within a band that now extends to 1.0%. More on this below.

Strong growth. US Q2 GDP yesterday surprised to the upside, suggesting that growth continues to be stronger than expected and that rates are likely to remain higher for longer. More on this below.

Crypto calm. The lack of volatility in the crypto market is just weird – BTC 7-day ATM implied volatility is back down to early January levels. Could this also herald a strong price bounce? Maybe, but the market is eerily quiet. More on this below.

Funding exit. Venture capital firm Sequoia has cut the size of its crypto funds by more than half, as it scales back its activity in the ecosystem after its high-profile loss on FTX and the exit of a significant part of its crypto team. Its main cryptocurrency fund will be reduced from $585 million to $200 million, and its ecosystem fund, which invests in other venture funds, will shrink from $900 million to $450 million. This is definitely an ouch – the crypto ecosystem was showing signs of investment activity returning, but these cuts are a strong blow to projects and the funds that invested in them.

Another coup. The sixth military coup in the Sahel in recent months highlights the uncomfortable shift away from democracy on the African continent. Even more than that, if successful, it represents another dent in US influence in the region, which would be significant not only in terms of the growth of al-Qaeda and Islamic State insurgencies in the region, but also in terms of dollar clout and the broadening influence of Russian affiliates.

GOING DEEPER

Oases of peace