Cryptos and the Fixed Income Selloff

So I wrote about cryptocurrencies back in September when it seemed clear that we were in the midst of a bubble. I guess I should have relayed what Soros says about bubbles. "When I see a bubble, I buy it." Now that Goldman Sachs is setting up a cryptocurrency trading desk, it is worth revisiting the topic. If the squid is setting up a desk, it means their customers are asking for it, and of course, because they think they can make a buck there. How will they do it? Will they launch a facility to borrow and lend? The GS crypto-repo desk?  


Looking back, how does my piece on bitcoin from September hold up three months and many billions of dollars later? I carried on for a while about how it doesn't look or act like a real currency. That's more even more true now than it was then. The volatility and appreciation in these "currencies" has wiped out any advantage for a seller to accept them as payment, even for pirates and drug lords. Are they really more like equities? That's what I have been told about ripple and etherium. Sure, ok...I actually understand the ripple business model but I don't see how it translates into buying their coins, or tokens or whatever they are. But I get it from a certain bubblicious standpoint.


Yet there are still millions, if not billions of people in this world that live in (or have recent memories of) autocratic regimes that have a habit of seizing control of the monetary system to serve their own purposes. That's the core market here, and one that people in the US and (western) Europe don't quite understand. So good luck crypto-traders and Goldman...I'm sure you're on the vanguard of a monetary revolution that finally takes back the monetary system from the rich and powerful.




Source: Coinmarketcap.com


And the sum of global equity mutual fund and ETF inflows? $411bn through November 29. While that market cap increase doesn't represent a dollar-for-dollar inflow, just stop and think about those numbers before you write this trend off completely.


In other news...are bond yields finally starting to break down?




Well….doesn’t look like it to me...I was on the record saying there had to be a large buyer of long end UST, especially in TIPS, throughout most of November and early December. Looks like that is cleaned up here and bond yields are getting sucked higher as one would have expected given the moves in underlying fundamentals and the advancement, and eventual passage of the US  tax reform package. And sorry to point this out, but there were more than one commentor (and trader) out there arguing that Trump could never pull off a tax reform after stumbling from one political disaster to another for most of 2017. Yet here we are.


As for the long bond….call me when we break 3%.


That’s going to put a wrap on Team Macro Man until after Christmas...I’ll be in front of a laptop all next week so I should have the chance to go a little deeper on the above topics and potential 2018 risk events. I wish I was talented enough to rhyme “Twas a Night Before Christmas” into a summary of 2017 macro events...if you are...I beg of you, please send it to me at the TMM2 address.


With that, Merry Christmas!  




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Asian Trader
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December 22, 2017 at 5:03 AM ×

Crypto is only nominally unlevered - many anecdotal stories of crypto currencies financed by credit card and home equity loans. Median BTC trade size is $49XX - a few big players and lots of little ones - just like a manipulated stock, with a likely similar end game. Financial times published a PR piece advising HODL for the long term - that is exactly a stock manipulators message as he does not want you selling in competition with him. Likewise total cash out by one coins founder..............

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Asian Trader
admin
December 22, 2017 at 5:05 AM ×

Demographics of BTC holders here https://bitinfocharts.com/

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IPA
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December 26, 2017 at 6:06 PM ×

Those who took the XOP trade @ $34.65... Out of the first scaleout right here and stop on the rest goes to $30.40

Also, the XRT trade has reached its ultimate target of $46. This trade is over.

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Shawn
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December 27, 2017 at 4:43 PM ×

@IPA, the XRT trade was a clever one....sentiment was in the dumpster but macro consumer fundamentals are strong--agreed the trade is over here. But what of bond yields? I don't think we're breaking out from here--the move in oil notwithstanding.

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