GM and BRRR.

The broad selloff continued on Thursday with equities, bonds, and crypto all dropping, culminating in the worst week for U.S. markets since March.

The price of bitcoin dropped ~9% shortly after a WSJ report that Elon Musk's SpaceX wrote down the value of its bitcoin holdings by $373 million over the past two years, leading some on social media to blame Musk despite unclear details about SpaceX's bitcoin transactions.

Following this barrage of news after market close, Bitcoin’s price experienced volatility not seen since the days following the FTX collapse.

In some positive news, Ethereum price jumped 11% yesterday after a Bloomberg report said the SEC would likely approve ETH futures ETF applications, spurring 12 companies to apply. However, market sentiment has dropped it’s value in early trading this morning.

Here are the broad strokes defining current sentiment:

-The Chinese economic recovery/reopening is badly lagging expectations
-Stocks are trading at high multiples with minimal upside remaining
-Meeting notes from the Fed’s July meeting were revealed to be hawkish

We put together an action-packed tweet to highlight the biggest stories about the failing Chinese recovery (view on Twitter if interested).

The market fundamentals have changed - and we’ve changed our near-term view on where markets are headed. We started to reflect this in our portfolio on Wednesday and are considering deploying the cash into an asset we’ve never discussed before.

You’ll want to upgrade to our premium tier for $2/month to see the asset we just added to our watchlist.

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World News

China Developers: Going, Going, Gone

China's real estate downturn is rapidly intensifying as home sales plunge, developers default, and contagion fears spread, threatening significant economic damage. Years of overbuilding have led to a supply glut, while restrictive policies limiting leverage have starved developers of financing, creating a perfect storm.

With sales down 33% in June and July, top developers face a severe cash crunch, as apartments are pre-sold before completion in China. This will likely lead to stalled projects and angered home buyers. The liquidity crisis comes as China's economy already faces slowing growth, with real estate accounting for up to 25% of GDP. China's FX net outflows were around $26B in July, the fastest pace of outflows since September 2022, in contrast to US$6B inflows in June.

• Evergrande's Ch.15 Filing: With over $300 billion in debt, its 2021 default on $19 billion rattled global markets. Yet its Chapter 15 filing indicates no substantive progress on restructuring its massive liabilities, which further erodes confidence in China's financial stability.

• Default Would Rock Markets to the Core: Meanwhile Country Garden, the largest developer, risks default on $22.5 million in bonds. Its failure would be a gut punch, signaling the contagion is spreading beyond over-leveraged state companies to the broader industry. Overall, Chinese corporates account for a staggering 40% of $17 billion in EM defaults this year.

• Whistling Past the Graveyard: While policymakers have hinted at support, their tepid response fails to address the systemic risks. Without aggressive efforts to unlock financing and spur sales, China faces not just an economic slowdown, but a devastating real estate collapse with ripple effects to be felt across global markets.

  Read more and here

Macro News

Interest Rates Up, Bitcoin Down

The Federal Reserve's consistent emphasis on inflationary concerns, as detailed in the recent FOMC minutes, has led to a series of interest-rate hikes that some market watchers deem overly aggressive. This recent decision, the 11th since March 2022, propelled the federal funds rate to a 22-year zenith of 5.25%-5.5%. While the FOMC minutes provide insight into the Fed's intentions to stabilize the economy and manage inflation, there's a burgeoning sentiment among experts that these measures might be more suppressive than corrective.

The market's reaction post-release of the FOMC minutes was telling: stocks like DJIA and SPX trended lower, and the yield on the 10-year Treasury note surged to 4.25%. Similarly, the cryptocurrency sector, often viewed as a pulse-check for global economic sentiments, reflected this unease with Bitcoin plummeting to a two-month nadir of $26,172.

• Influence on Global Markets: The Federal Reserve's decision to raise interest rates reverberates beyond the U.S. borders. Following the release of the Fed minutes, not only did domestic stocks like DJIA and SPX remain low, but international markets also exhibited signs of strain. European and Asian stock markets also reacted negatively to the Fed's hawkish stance, highlighting the global reach of U.S. monetary policy.

• Bitcoin as a Barometer: Bitcoin's recent drop, culminating in a two-month low of $26,172, serves as a stark reminder of its role as a digital gold—a sentiment gauge for global economic health. Beyond the crypto-specific events, such as SpaceX's $373 million write-down, Bitcoin's price movements are increasingly correlated with geopolitical tensions. During times of international conflict or political instability, Bitcoin often experiences significant price fluctuations, reflecting its status as a potential safe-haven asset akin to gold.

• TradFi Meets Crypto: As Bitcoin's value responded positively to BlackRock's Bitcoin ETF application, it signaled a growing legitimacy of digital assets in the eyes of traditional investors. Moreover, central banks around the world, including the European Central Bank and the People’s Bank of China, are actively exploring or piloting central bank digital currencies (CBDCs).

  Read more and here

  
  

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Elon re-considering his BTC stance

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