Fear! Crypto Crash Erases More Than $1 Trillion in Market Value (As Dow Tanks 430 Points)

For Bitcoin, there’s only been one constant recently: decline after decline after decline. And the superlatives have piled up really quickly.

With the Federal Reserve intending to withdraw stimulus from the market, riskier assets the world over have suffered. Bitcoin, the largest digital asset, lost as much as 8.7% Friday and dropped below $38,000 to its lowest level in six months. Since its peak in November, it has lost 40% of its value. Other digital currencies have suffered just as much, if not more, with Ether and meme coins mired in similar drawdowns.

Bitcoin’s decline since that November high has wiped out more than $570 billion in market value, and roughly $1.17 trillion has been lost from the aggregate crypto market. While there have been much larger percentage drawdowns for both Bitcoin and the aggregate market, this marks the second-largest ever decline in dollar terms for both, according to Bespoke Investment Group.

“It gives an idea of the scale of value destruction that percentage declines can mask,” wrote Bespoke analysts in a note. “Crypto is, of course, vulnerable to these sorts of selloffs given its naturally higher volatility historically, but given how large market caps have gotten, the volatility is worth thinking about both in raw dollar terms as well as in percentage terms.”

Bitcoin plunge wipes out billions in a jiffy — Bloomberg

With the Fed’s intentions rocking both cryptocurrencies and stocks, a dominant theme has emerged in the digital-asset space: cryptos have twisted and turned in nearly exactly the same way as equities have.

Bitcoin/Ethereum/Dow Slide As Gold Rebounds (Fun Times As $3.3 Trillion Options Expire)

Yes, it is fun times in markets this Friday as $3.3 trillion in options expire.

As of 9:52am EST, we see Bitcoin (white) and Ethereum (blue) falling along with the Dow (pink), while gold (gold) fell then rebounded.

European stock markets are down 2% today.

Global sovereign bond prices are up across the board internationally as yields decline.

Crude oil is down today while natural gas is soaring. In particular, look at UK natural gas prices!

Brrr.

10Y Treasury Yield Climbs To Almost 1.8% As Mortgage Rates Rise, Cryptos Bitcoin & Ethereum Having A Bad 2022

2022 should be an interesting year as the wheels come off The Fed’s constant stimulation of markets.

Today, we saw the 10-year Treasury Note yield almost hit 1.8% as mortgage rates rose to 3.22%.

Unfortunately for crypto investors, bitcoin is having a bad 2022. And ethereum is feeling some pain as well.

While Goldman Snakes predicted 4 rates increases in 2022, Fed Funds Futures are predicting almost 4 rates increases (3 in 2022 and 1 in Jan 2023 … almost).

So whatever is giving markets the jitters, I would follow the advice of Samuel L. Jackson from Jurassic Park: “Hold on to your butts.”

UPDATE: Did The Fed/Treasury seriously overreact due to COVID? Lool at Treasury issuance related to COVID recession versus the financial crisis (Great Recession) and the 2001 recession.

People Get Ready! Value Stocks UP For 2022 While Growth Stocks DOWN (As Fed Expected To Withdraw COVID Stimulus)

People Get Ready! There’s a train a coming. Its called The Federal Reserve.

The market is pricing in 3 rate increases in 2022. And perhaps a faster than expected withdrawal of balance sheet stimulus.

As a result, The Russell 2000 Growth index is plunging (orange line) relative to the Russell 2000 Value index (white line) which is down in 2021.

The Société Générale (SGI) US value and “quality” indices are telling the same story. The SGI US “Quality” index is falling like a paralyzed falcon while the SGI US Value index is up for 2022.

It is somewhat mystifying that markets would be soooooo sensitive to 3 rate increases from The Fed, particularly since the Taylor Rule suggests that The Fed’s target rate should be 17.36%. Even if you don’t like the Taylor Rule or disagree with its inputs, you must admit that the gap between where The Fed is (0.25%) and where they should be (17.36%) is … k-razy.

But here is where we sit.

5-Year Treasury Yield Highest Since Fed COVID Intervention As Canada 10Y Rises 18.7 BPS (Gold, Bitcoin, Ethereum Rise)

Treasury yields rose a second day, with five-year rates hitting the highest since before the pandemic took hold in the U.S., amid increasing conviction that the Federal Reserve will raise rates at least three times beginning in May.

The five-year Treasury note’s yield climbed as much as 3.8 basis points to 1.392%, the highest since Feb. 20, 2020, while 30-year yields bumped up toward their 200-day moving average.

Yields across the curve are rising for a second straight day, after Monday’s selloff lifted the 10-year note’s yield by nearly 12 basis points in its worst start to a year since 2009. The two-year yield topped 0.80% for the first time since March 2020.

At the 10-year mark, we see Canada’s sovereign notes rising 18.7 basis points.

Also at the 10 year mark, we see the US 1-year breakeven inflation rate (red line) surging.

The US Treasury actives curve and Dollar Swaps curve remain steeply upward sloping.

And on the crypto and gold front, gold surged this morning after tanking in the evening, while Ethereum (blue) is doing quite well along with Bitcoin.

My favorite non-bond, non-alt investment chart. The S&P 500 index charted against The Fed’s M2 Money Stock.

Following my friend Jesse’s habit of posting great French food dishes, here is one from my favorite Parisian eatery, Le Duc de Richelieu. Mmmmmmm.

RIP, Hap Jacobs.

Can The Crypto Ethereum Hedge Against Inflation? (Inflation Rate Highest In 40 Years)

Inflation is the highest in 40 years. There used to be a lot of discussion about hedging against inflation in the 1970s and 1980s, but discussion subsided as inflation cooled in the US. But now it is roaring back as Fed monetary stimulus continues unabated and The Federal government continues to spends like crazy.

So, how do we protect ourselves against inflation caused by Federal government policies (or follicies)? How about cryptocurrencies like Ethereum?

Ethereum really started to take off as US inflation took off. Not a perfect fit (or hedge), but on average Ethereum has kept up with inflation.

If you believe in technical analysis, Ethereum is in the 3rd wave on the downside.

But if you believe the Ichimoku Cloud, Ethereum lies BELOW the cloud indicating that Ethereum is likely to rise.

Bear in mind that Biden’s energy policies have created large increases in energy prices which lead to large increases in other products such as food prices. Again, not all inflation is due to Federal policies. Arabica coffee prices are driven by droughts and excessive rainfall, etc. But inflation causes a rise in agriculture prices due to transportation cost increases, increases in fertilizer prices (thank to natural gas price increases), and panic buying by consumers.

Despite what Federal officials jawbone about, inflation has momentum and is unlikely to swiftly subside, particularly if the Build Back (Inflation) Better Act passes in 2022.

Remember, consumer purchasing power of the US Dollar has declined dramatically since the creation of The Federal Reserve System in 1913. The Fed isn’t going away and neither is wasteful Federal spending, like BBB.

Protect yourself! Or at least Treat Yo Self!

The Great Distortion! Since COVID And Fed Hysteria, First Gold Then Bitcoin, Then Ethereum Surged While The US Dollar Declined Then Rallied

The global economy has certainly been turned on its head by the COVID outbreak in early 2020. Not so much by the virus itself, but by Central Bank hysteria in terms of rate lowering and balance sheet expansion. Which The Fed has not yet unwound.

Let’s look at what has happened since the mini-recession caused by COVID in early 2020. The shortest recession in US history, a measly 2 months. The Fed expanded its balance sheet from $4.17 million in February 2020 to $8.79 million today. That is, The Fed over doubled the size of their balance sheet in reaction to the shortest recession in US history. Overreaction much?

What has happened since the mini-recession and The Fed’s massive overreaction?

First, gold (gold line) surged then calmed down. Then cryptocurrency Bitcoin (while line) surged, then calmed down, then surged again only to calm down again. Then crypto Ethereum surged, calmed, surged, calmed. Meanwhile the US Dollar Index crashed only to start rising again.

The Fed’s overreaction and failure to withdraw excessive stimulus has led to the rise of alternatives to the deflating dollar due to inflation.

When will The Fed ACTUALLY start removing the overreaction stimulus? Let’s get it started.

Perhaps only April Ludgate can kill The Fed’s overreaction stimulus.

GameStop: Rage Against The (Financial) Machine? Or Bidenflation? (Meme Stocks, Gold And Cryptos)

2021 has been a very weird year. Inflation has boomed (highest in 40 years) after the election of Joe Biden as President of the USA (call it Bidenflation). Then we have The Federal Reserve barely acting on the booming inflation (keeping rates at 25 basis points while withdrawing the COVID-related monetary stimulus).

Then we have the rise of cryptocurrency Ethereum and the surge meme stocks such game store GameStop, a favorite of the internet site Reddit.

Given the volatility of GameStop (Reddit-inspired), you can see the strange shape of GameStop’s volatility surface.

By contrast, gold is now where it was was at the beginning of 2021 and the surge of Bidenflation.

Here is volatility surface for gold.

So, there are a number of meme stocks (GameStop is just one example), gold, silver, cryptos such as Bitcoin and Ethereum. But gold seems to be placid with respect to inflation, but the meme stocks and cryptos seem to be motoring. Or is it rage against the financial machine? Or rage against Bidenflation??

The US stock and bond markets are closed today and tomorrow, Christmas day.

Have a Merry Christmas! And celebrate the “Santa Pause” as Powell refuses to raise rates to combat inflation until 2022.

Gold Rises, Dollar Declines, Cryptos Quiet On Third Day Before Christmas (10Y-2Y Treasury Curve Back To Pre-Biden Slope)

With just three days until Christmas, we are seeing gold (gold line) rise, the US Dollar (green line) fall and the major Crytos Bitcoin and Ethereum remain quiet.

And the US Treasury 10Y-2Y slope is back to where is started when Biden was elected.

The University of Michigan consumer survey numbers are out tomorrow. Let’s see how they look. Or will they simply be anticipating Michigan playing Georgia in the Orange Bowl??

China Contagion (Not Wuhan Virus, But Real Estate), Kaisa Down 13%, Evergrande Down 4.32%, Shimao Down 6.40%, Chinese Estates Down 30.42%

While the Chinese Wuhan virus (aka, the Fauci Flu) has plagued the world, another Chinese “export” is also suffering what is known as contagion: China’s real estate sector.

Real estate companies Evergrande, Kaisa, Shimao and Chinese Estates are falling like a rock today.

But it has been a steady decline since Q1 2021 except for Chinese Estates. But they have resumed their death dive.

On the debt side, Evergrande is down to 18.856 while Kaisa has lost less (but still quite a bit) and Shimao’s bond look almost like a good investment, relative to Kaisa and Evergrande. But they are all sucking wind. Maybe they all have the Fauci Flu?

Let’s see if this latest Chinese “export” washes ashore in the USA.