$BTC 24 Hour High $11,807.63 $BTC 24 Hour Low $11,648.37 $BTC +0.35%
Total Market Cap $364.3 BN (-1.17%)
24 Hour Volume $83.8 BN (+0.48%)
BTC Dominance 59% (-0.17%)
The K-Shaped Recovery Widens the Wealth Inequality Gap
Before we get to the digital assets market (which stalled last week for the first time in five weeks), let’s take a moment to marvel at what might be the most incredible equity bull run the market has ever seen. According to Edward Jones, since 1956, it typically takes four years on average for stocks to recover from a trough to a new record high, but last week’s record high in the S&P 500 was reached in just six months after the March low.
Peeling back the onion, while the S&P 500 looks the same now as it did in February, the corporate and economic fundamentals that typically drive stock returns are quite different. Said another way, this is not the playbook anyone would have written for reaching new highs. Even those of us who held the opinion that stocks won’t go down until 3Q and 4Q earnings never imagined the market would reach new highs.
Five months ago, just about every investor was forced to pick a side -- expect either a V-shaped recovery, or a horrible depression. As usual, the extremists got it wrong. Emily Barrett of Bloomberg summed this up nicely, saying that the recovery has actually been K-shaped, which partially explains why the stock market has recovered so quickly despite incredibly lumpy and contradicting economic data:
“The idea behind the letter K is that some people and companies have managed to get through the health crisis in good shape, while many others are suffering. K-shaped economic and market data show a widening gap between the comparatively privileged -- for instance, those with jobs they can readily do from home -- and the disenfranchised. This divergence is wretched in part because it raises the risk that those in charge of the rescue effort will call it off when headline numbers are looking better. For instance, the urgency of another $1-trillion-plus stimulus package was apparently harder to grasp with payrolls numbers beating expectations. The Covid-19-exacerbated gap between the privileged and the rest is a depressingly pervasive pattern, and it’s reflected in the bond market. This week, high-grade issuance reached $1.346 trillion year-to-date, smashing the full-year record set in 2017. Over the past three months, A-listers like Amazon, Alphabet and now Apple have each secured the lowest borrowing costs in history, or got close to them, for monster deals. Meanwhile, New York’s MTA just turned to the Fed for affordable funding. Unequal access to the corporate bond market puts the U.S. recovery at risk. Disparities have always existed in the bond market, but more banks have tightened standards on lending to small businesses than at any time since 2009, and the stakes are higher than ever now, amid warnings of record corporate defaults and bankruptcies. The painful and long-term implications of a K-shaped recovery are kryptonite to the Fed, which has faced widespread accusations of exacerbating inequality in its response to the global financial crisis.”
Wealth inequality is one of the “Big Factors” that is shaping our world, now and in the future. Everything from politics, to Brexit and Occupy Wall Street, to the recent global riots are fueled by people who are essentially saying, “I don’t care how bad the alternative is, we want something new.” Monetary inflation explains a substantial portion of the wealth gap, as does capital formation solely rewarding equity holders over customers. Sound money like Bitcoin may fix the inflation problem, by restoring fiscal and monetary discipline and ultimately rebuilding the middle class. Meanwhile, democratized capital formation via digital assets that reward community and network users instead of equity owners may fix the equity-holder problem.
Under this pretense, it’s not surprising that digital assets are growing so quickly. Democratizing finance helps to eliminate the wealth gap, slowly but importantly. It helps reward builders and community members and early evangelists, not just inflation-protected equity holders.Everywhere you look, you see growth and adoption.
The Elite are Being Forced to Use a New Playbook Naturally, the elite shunned digital assets for as long as humanly possible -- but they are coming around now, quickly. If you can’t beat ‘em, join ‘em.
Warren Buffett recently dumped airline and financial stocks and bought a gold miner stock. This of course made headlines. Perhaps the headlines should have read, “Old playbooks no longer work”. This is not unique to Mr. Buffett… go down the list and you’ll see leaders in every niche of the capital markets now trying something new:
Asset Managers: Paul Tudor Jones and Renaissance Technologies are now involved with Bitcoin
Investment Banks: Goldman Sachs makes big hire on their digital assets team and JP Morgan begins banking Coinbase and Gemini
Public Companies: Microstrategy announces the first corporate finance Bitcoin cash management strategy
Private Companies: Atari and Reddit experiment with issuing digital assets to bootstrap growth and reward users
Governments: Numerous countries are working on their own Central Bank Digital Currencies (CBDCs), while the IMF just issued an explanatory video about cryptocurrencies
Old guards: Former Prudential CEO changes his tune on Bitcoin, and now turns bullish
And it’s not just Bitcoin. “Cryptocurrency” is an outdated term, and simply does not include the bulk of the thriving digital asset universe. While 2017 famously brought ICO scams and useless, poorly constructed tokens that were trying to piggyback on Bitcoin’s and Ethereum’s success, 2020 has brought “Pass-Thru” tokens, which are arguably the most dynamic investment structure ever created. Companies can now pass through revenues, profits, user growth and rewards all in one investment vehicle. These quasi-equity / quasi-utility features allow companies to reward their customers with equity-like returns, while also giving their customers discounts and heavy incentives to use their products and evangelize on their behalf. There will undoubtedly be a public company in the near future that recognizes this flexible and non-dilutive addition to the capital structure, and issues their own pass-thru token.
Digital assets market:
On the digital asset side, we’re seeing renewed bullish momentum as the DeFi sector makes another push overnight with a strong performance across the board for the main large-cap DeFi coins. Overall market cap increasing 1B overnight
Of the top 10 large cap coins; $BCH, $LTC and Chainlink dropped around 0.4% with a mixed bag of positive performance amongst the rest from 0.25% to 2.88% on $BTC and $BSV respectively.
$BTC range bound levels bumped up 100 from yesterday from 11,650 to 11,800 with $BTC dominance at 59% for the past few days. $BTC has maintained above 11,100 levels for the past 23 days. Month to date it’s down 1%
$ETH coupling movements with $BTC, as it maintains 400 levels while range bound between 400 and 412, trading at neutral levels, trading on the bottom Bollinger bands
Alts and DeFi watch:
$LINK broke 15 support as bears take control as focus shifts off $LINK and onto $AAVE and $YFI Currently trading at 14.86, dropping nine out of the last ten days (down 26% during this period)
$AAVE up 15% overnight from 0.63 to 0.74 off the news it has secured a UK financial license to issue e-money, currently trading at overbought levels and 20c above 10 day SMA expectations
$YFI breaks back above 14,000 levels after recovering from 11,000 levels three days ago. Seeing a traded range of 300 while YFIBTC currently at 1.20. Currently overbought RSI levels with +1.4% above 10H SMA levels and +5% above 100H SMA averages
Will the nonstop headlines and framing around the "hot" new DeFi protocols chill the institutional adoption that is beginning in earnest for crypto, digital assets and blockchain technology? We believe that, at a minimum, the industry needs self-regulation. Without it, it is on a trajectory to serious regulatory scrutiny and reputational risk.
DeFi lending protocol Aave is on a roll, with new features and upcoming releases inducing a flood of value into the protocol. Aave has seen the total value locked (TVL) in DeFi smart contracts grow more than 170% to over $1.3 billion since the beginning of August, and more than doubled since August 10, according to DeFi Pulse.
Messari believes that Yearn.Finance's YFI token is one of the least expensive in the DeFi space, according to its price-to-sales multiple. The metric is calculated by dividing a token's market capitalization by its annualized yield. For reference, the same ratio for CRV, another popular DeFi token, is 1568x, making it 78 times more expensive according to this ratio.
Curve Finance is currently the third largest DeFi protocol, with a total value locked, or TVL, of $1.1 billion. Recently the community realized that the project's founder, Michael Egorov, had leveraged over 71% of the voting power, ultimately leading to backlash from the community.
Aave Has Been Granted an Electronic Money Institution license by the U.K. Financial Conduct Authority
Aave Limited was granted approval on July 7, according to public information published by the U.K. Financial Conduct Authority (FCA), which issued the authorization. Such an authorization allows the recipient to offer services such as issuing digital cash alternatives and providing payment services.
Beijing-based decentralized finance (DeFi) aggregator Bella Protocol announced Tuesday it has raised $4 million in a funding round led by Arrington XRP Capital. According to a press statement emailed to CoinDesk, investors in Bella’s funding round also include Alphabit, Consensus Labs, Force Partners and CGS Dubai, among others. Marketed as a one-stop shop for DeFi assets, the firm’s asset management platform is currently under development.