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Q9 Markets: Inch-by-Inch

Q9 Capital
5 min readFeb 18, 2022

18th February 2021

Q9 Capital: www.q9capital.com

  • Russia-Ukraine tensions and Fed minutes knock markets
  • Retail flows down, insto flows up
  • “Crypto Bowl” ads reach 112mn viewers

Crypto markets pulled back last night after a rally fuelled by the crypto-heavy Super Bowl, which broke records for viewership ratings with an audience of 112mn (the “Don’t Miss Out on Crypto” advert featuring Larry David is a must watch). Coinbase suffered an outage following their ad that drove more traffic than they had “ever encountered”.

Broad market uncertainty continues to weigh on crypto and equities as Russia-Ukraine tensions build and the Fed’s President calls for quicker rate hikes. Wall Street and European stocks also sank on Thursday as the US said Russia was on the brink of invading Ukraine within several days and Russian backed separatists exchanged shells with Ukrainian forces in the east. The market declines this year have wiped more than $3tn off the value of US stocks, with the S&P 500 down over 8%.

BTC and ETH, meanwhile both fell to $40.5k and $2.9k overnight, posting weekly losses of -6.9% and -6.4% respectively. Bitcoin quite clearly is still viewed as a ‘risk-on’ asset at the moment and declining in line with broader assets and tech. Safe-haven asset gold has soared to an 8-month high, rising 12% week-on-week.

Metaverse tokens are also down (SAND -15%, MATIC -12%, ENJ -13%) along with Metaverse equities. Facebook is down 5% for the last week having posted a 31% decline during the last month.

Ebbing and Flowing

Retail and insto appetite appear to be bifurcating. Robinhood’s crypto trading revenue has fallen 79% from its quarterly high in mid-2021, including a 5% slump in the most recent quarter. That’s in line with a broad volume drop in crypto, which has been declining since last January and fell further in December:

Source: Financial Times

Retail investors’ top picks now look more like they did in early 2020, when the roster of the most-popular stocks was made up almost entirely of blue chip names and ETFs representing broad bets on US stocks or bonds, according to data from VandaTrack.

But in crypto, retail is only half the story. Crypto firms are swimming in institutional money, mostly provided by VCs. Just this week, Polygon raised $450mn from funders including Sequoia Capital and SoftBank’s Vision Fund 2. Ebbing retail interest and falling prices have not deterred VCs, who smell huge profits if crypto becomes critical financial infrastructure. So with peak speculation behind us, meme stocks are listless while crypto has the funding to push on. And crypto has recovered from enough slumps to assure some commentators that the revolution is coming.

Source: Financial Times

Any Given Sunday

The winner of this year’s Super Bowl is… drum roll… Crypto.

The 2022 event has been dubbed the “Crypto Bowl” based on the number of crypto advertisers vying for viewers’ attention and trust. Not only that, the game was held at the SoFi stadium, a financial services company offering crypto trading. Along with Coinbase, crypto exchanges FTX and Crypto.com and eToro all appeared during commercial breaks.

Like all brands, crypto companies need to create awareness, engagement, and build consumer trust. But mainstream perception that crypto investments are risky means that the latter is especially significant — and showing up in an established and expensive event like the Super Bowl cultivates legitimacy and trust. This time to an audience of 112mn viewers. FTX founder Sam Bankman-Fried says that the company’s Super Bowl ads are courting not only consumers but also US regulators. “We want to make sure that we’re painting, hopefully, a healthy image of ourselves and the industry… a lot of that is working with US regulators on bringing new products to market.”

Al Pacino’s “inch-by-inch” speech in Oliver Stone’s American Football epic Any Given Sunday certainly rings true. The “crypto revolution” trade is a crowded one and every single platform, protocol and investor is fighting to win inch-by-inch and play by play.

“Because in either game, life or football, the margin for error is so small. I mean, one half a step too late or too early and you don’t quite make it. One half second too slow, too fast and you don’t quite catch it. The inches we need are everywhere around us. They’re in every break of the game, every minute, every second.” — Tony D’Amato, Any Given Sunday

With all the VC funding that has come into crypto and is still coming.. new and exciting businesses will be growing inch-by-inch. Keep your eye on the basics, BTC, ETH, L1’s, which are currently the rails into and within crypto, NFT’s and the metaverse. If they are not too weighted down by beta they should continue to be the first port of call for inflows.

In the News…

Legacy Markets

Oil futures rose +1.9% while the SPX fell -2.7% over the week. 10-year US treasury yields slipped 8bps, the US Dollar index was flat and the Gold & Silver index jumped +11.9%.

Crypto Markets

  • BTC/USD dropped -6.9% and ETH/USD fell -6.4%. The total market cap of the crypto universe dropped below $1.9tln and Bitcoin’s dominance hovered around 41.7% during this week
  • SOL dropped -12% from last week levels. Among metaverse coins MANA outperformed others, dropping -2.2%
  • Annualised volatility in crypto markets remained unchanged: 65% for BTC and 82% for ETH

Flows

  • Strongly bid client pad (4 x buyers vs sellers)
  • Net buyers in BTC, ETH and SUSHI
  • Mild buying activity in AVAX and AXS

Q9 Capital: www.q9capital.com

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Q9 Capital

Written by Q9 Capital

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