Friday, May 26, 2023

Market volatility, crypto volatility, bitcoin and politics, NFT finance and more

“Wisdom comes from experience. Experience is often a result of lack of wisdom.” – Terry Pratchett ||

Hello everyone, and happy Friday! I just want to take a moment to say I appreciate you all very much – thank you for reading, and for caring about the rapid changes we’re seeing all around us.

You’re reading the premium daily Crypto is Macro Now newsletter, where I focus on the growing overlap between the crypto and macro ecosystem. Thanks so much for being a subscriber! Nothing I say is investment advice. Nevertheless, I hope you find it useful – if so, please consider hitting the ❤ button at the bottom and sharing with friends and colleagues. 😊

If you’re not yet a subscriber, I hope you’ll think about becoming one to support my work. For only $8/month (with a free trial!), you get deeper daily comment, some interesting reads/listens, occasional life advice (such as carrying a towel), usually uplifting titbits, lots of charts and more. Plus, it would REALLY make my day!

Programming note: This newsletter will be taking a Memorial Day/May Bank Holiday break on Monday and also on Tuesday. Back on Wednesday, June 1!

WHAT I’M WATCHING

• Market nerves. Stock and bond volatility indices are finally showing some awareness of how fragile current levels are – crypto volatility indices aren’t however. More on this below.

• Bitcoin and politics. Another presidential candidate, Vivek Ramaswamy, has some issues with Ron DeSantis’ apparently superficial understanding of crypto (eg. bitcoin isn’t something you “do”). While it is probably true that Ramaswamy has a better grasp of the technology and the potential, and while we can bristle at the idea of crypto being used as a politically convenient slogan only to be ditched once it’s had the desired effect, the end impact will be positive. More public dialogue from politicians around how crypto can strengthen the financial system (Ramaswamy) and how bitcoin is more about civil liberties than speculation (Kennedy, DeSantis) could be enough to shift some understanding and maybe even start to change the overall tone in Washington DC. On a broader canvas, it could even boost awareness of the power behind a tradeable asset that also represents a political philosophy rooted in hope. US politics could use some more of that.

• Bitcoin-backed stablecoins. Stably USD aims to become the main stablecoin for the growing Bitcoin-based NFT ecosystem, which until now has been lacking a dollar-pegged payment token. It is still unclear what kind of demand there will be for this, but what I find so interesting is the growing on-chain economy which is exploring new uses for the Bitcoin blockchain without needing to change its code. This is open-source innovation at work, and is yet another reminder that technology uses evolve with time, so claims that Bitcoin will “never” be x or y should be ignored.

• NFT finance. Binance has launched a feature that allows eligible users to deposit NFTs as collateral for loans in ETH. It’s not yet clear how much demand there will be for this, nor what its impact on prices could be, but it does suggest the emergence of a more sophisticated NFT financial market. It’s early days yet, and we are far from being able to call it “sophisticated”, but these steps are not small and they are heading in the right direction.

MARKETS

US government debt markets are starting to show signs of stress more in line with the tense situation they are in. Yesterday, the US 2-year yield broke past 4.5% for the first time since March, pushing the 10y2y spread back down to -0.67, its most negative this quarter.