Apr. 12 Markets Report: The Fear Index

With each passing week, the world is seeing more evidence of Russia’s war crimes against Ukraine. Last week we heard about the massacre in Bucha. This week, Ukrainian soldiers found graves with dozens of civilians in Buzova. To make matters worse, a train station in Kramatorsk was hit by a Russian rocket strike on April 8, wounding up to 300 people and killing at least 52.

Following events like these, The United Nations General Assembly has rightfully expelled Russia from the Human Rights Council. Meanwhile, the EU has continued to intensify sanctions by banning the import of Russian coal, with Japan now joining in. But in spite of these sanctions, Russia has still been able to earn $3.4 billion in oil and gas revenues since the start of the war and prevent its economic collapse.

Over in the US, the Federal Reserve released its March meeting minutes on Wednesday. Fed officials have agreed to begin reducing the central bank balance sheet by $95 billion a month in May. And if inflation continues to trend up, then a 50 basis point (0.5%) rate hike is also in the cards. Speaking of inflation, China’s CPI for March came in at 1.5% off the back of its current COVID wave. 

Check out the details and get updates on more of your favorite asset classes below.

After a week of Bitcoin moving sideways, the Crypto Fear & Greed Index is now back in the Fear zone as BTC and ETH sank to $40.8K and $3.02K. While Bitcoin’s narrative as the world’s hardest money is as strong as ever, its current correlation with stocks combined with the market’s risk-off sentiment is suppressing BTC and crypto prices.

Arthur Hayes, ex-CEO of BitMEX, recently warned that things will get worse before they get better. Despite being bullish long-term, he believes that BTC and ETH will test $30K and $2,500 in the coming months. 

Despite this short-term bearish sentiment, I’m sure Bitcoiners are still riding high after The Bitcoin 2022 conference in Miami. Miami Mayor Francis Suarez kicked things off by unveiling the Miami Bull, a black mechanical bull with laser eyes that serves as the crypto version of Wall Street’s Charging Bull. 

As far as announcements go, two new jurisdictions are adopting Bitcoin as legal tender: Roatán, Honduras and Madeira, Portugal, with Mexican Senator Indira Kempis stating that Mexico is also exploring this possibility.

On the business side, Strike CEO Jack Mallers announced that they are integrating with Shopify and a few of the world’s largest Point-of-Sale (POS) providers to enable Bitcoin payments.

And in terms of insights, Cathie Wood of Ark Invest predicts Bitcoin to hit $1 million in the next 8 years, MicroStrategy CEO Michael Saylor said that he is optimistic on US crypto regulation following President Biden’s executive order in March, and Mexican billionaire Ricardo Salinas Pliego mentioned that he holds 60% of his portfolio in Bitcoin. 

Honorable mentions

• Terraform Labs (TFL) and the Luna Foundation Guard (LFG) have purchased $200 million worth of Avalanche (AVAX) in order to “strategically align ecosystem incentives”.  
• Ethereum founder Vitalik Buterin has donated $5 million worth of ETH to Ukraine. 
• Blockchain company Blocksteam has broken ground on an all-solar Bitcoin mining facility it’s building in Texas with Block (formerly Square) and Tesla. 

With mortgage rates loosely following the US 10-year Treasury, it sort of makes sense that the 30-year fixed mortgage is now sitting at over 5.06%. But this 11-year high in mortgage rates is terrifying nonetheless. 

Data provider Black Knight’s latest Mortgage Monitor report bears more bad news: a record year-over-year home price growth of 19.6%. And that’s not all. According to Black Knight, the national mortgage payment-to-income ratio — which hovered around 20% during the 2010s — has now topped 29%. 

Since most homeowners already have their rates locked in, it's first-time buyers that are going to be feeling the pain of soaring rates. Even so, some economists think that rate increases are a necessary evil to cool down this red-hot housing market.

Redfin’s latest Housing Market Update lends credence to this, with 12% of homes for sale dropping their prices last month. A year ago, that figure was only 9%. 

The US stock market is down big time this week, with the Nasdaq Composite plunging -6.94%, the S&P 500 dumping -3.08% and the Dow Jones tumbling -1.08% as of writing this. 

Amid this market-wide sell-off, the best performing sectors are Health Care at 4.22%, Energy at 3.14%, and Consumer Staples at 3.06%. Individual stocks outperforming the rest of the market include fertilizer producer Mosaic (10.24%), frozen potato maker Lamb Weston (9.29%), and medical supplies manufacturer Cardinal Health (9.17%).

Also worth mentioning, Twitter shares dropped over -3.55% after last week’s 230% rally on news that Elon Musk isn’t joining the board of directors anymore. 

In the face of increasingly hawkish Fed policy, bond yields continue to rip higher. This past week, the US 10-year Treasury yield jumped over 30 basis points to 2.78% — the highest it’s been since 2018. In the coming days, investors remain focused on the consumer price index for March, as well as the latest earnings from banks like JPMorgan and Goldman Sachs.

It seems that NFTs have been on a steady downtrend all quarter. According to DappRadar’s Q1 2022 report, the NFT market went from generating $6 billion worth of trading volume in January, to $4 billion in February and $3 billion in March. 

But despite the temporary wind down, the NFT market is probably going to end up topping last year’s figures. NFTs did over $12 billion in Q1 of 2022 alone, which is already more than half of the $23 billion generated all of last year. 

These days, even nation states are joining in on the NFT craze. Last week saw the release of Ukraine’s META HISTORY: Museum of War. And during Fintech Week 2022, Economic Secretary to the Treasury John Glen indicated that the UK government is also planning to create a national NFT.

The top NFT collections this week are Terraforms ($216.22M), Meebits ($100.96M) and 3Landers ($36.29M). The best-selling NFT, on the other hand, is Coffin Dance (Dancing Pallbearers) for 327 ETH or $986K. This purchase reminds me of the Nyan cat NFT that got sold for $600K last year. Are NFTs of internet memes worth millions? I’ll leave that for you to decide. 

Honorable mentions

• Zigazoo is launching NFTs for kids based on popular video series like CoComelon.
• Solana NFTs are now live on OpenSea, the largest NFT marketplace.
• The hacker that stole $622 million from Axie Infinity’s Ronin Bridge is trying to launder their funds through privacy mixer Tornado Cash. Meanwhile, Axie Infinity creator Sky Mavis raised $150M to reimburse victims of the hack.

According to the UN Food and Agriculture Organization (FAO), the Ukrainian war has caused global food prices (particularly vegetable oils and cereals) to soar 12.6% since February. The FAO Food Index, currently sitting at 159.3 points, is also the highest level we’ve seen since at least 1990. 

Countries in the ​Asia-Pacific, sub-Saharan Africa and others that are heavily reliant on Ukraine and Russia for their grains and vegetable oils are being hit the hardest. There have already been protests in Sri Lanka, Pakistan and Peru over rising food and fuel prices. 

In the midst of this global inflation and rising bond yields, Gold is up 0.96% for the week and currently trading at 1,947 per troy ounce.

WTI Crude Oil, on the other hand, has fallen -8.34% this week to $94 per barrel. The two main factors that played a role here are: the U.S. and other countries announcing plans to release oil from their strategic reserves, and China’s Covid lockdowns weakening demand for oil. 

In the meantime, EU countries like Italy and Germany continue to look for ways to cut off Russian oil dependence. With the EU relying on Russia for around 25% of its oil imports and some member states being even more dependent, a 100% Russian energy ban is very unlikely at this point.

Art

• Pablo Picasso’s 1932 portrait, Femme nue couchée, is looking to fetch $60 million at auction on May 17. 
• Christie’s Paris will auction a newly attributed Michelangelo drawing for an estimated €30m on 18 May. 

Startups

• Liquefied natural gas (LNG) provider Excelerate Energy (EE) is planning to IPO at $360 million this Wednesday. 
• Media and e-commerce company Hypebeast is merging with Iron Spark in a $352 million SPAC deal to list on the Nasdaq.

Sports Cards

• An autographed Josh Allen rookie card just sold for $312K at auction.

Impact Investing

• Investors may now have some assurances that their investments are actually having some impact in the ESG space, as the Global Impact Investing Network (GIIN) released the beta version of its IRIS+ impact performance benchmark.
• The SEC will be prioritizing regulation of ESG investments this year, according to its recently released Examination Priorities Report.