Q9 Markets | “We Like The Stock”
19 August 2022
Q9 Capital: www.q9capital.com
“We Like The Stock”
- Puelle Multiple signals market bottom, lowest since 2019
- NFT volumes, prices, users, search fall +70% since Q1
- Meme stocks are back
Crypto markets pulled back slightly this week with both Bitcoin (-3.1%) and Ethereum (-1.8%) failing to remain above their psychological supports of $25k and $2k. A rebound above these levels would be a bullish signal and could lead to a further rapid rally in prices.
Meme coins Dogecoin (+5.8%) and Shiba Ibu (+9.8%) were solitary positive movers, following the reemergence of meme stock volatility in the equity markets.
Fed minutes released late Wednesday showed policymakers discussed the need to continue raising interest rates to keep borrowing costs at levels that restrict US economic growth for long enough to tame inflation. Crypto prices are sensitive to changes in Fed policy and have halved since the central bank kicked off its tightening cycle in March.
The push for continued rate hikes and restrictive policy contradicts recent market pricing, which had indicated expectations of interest-rate cuts in 2023 and lifted BTC to a two-month high of $25,203. The surprise may inject volatility into markets. Traders expect rates to peak around 3.7% by March and remain there until late 2023. Meanwhile, inflation rates have also risen dramatically in Europe with the UK (+10.1%) Spain (+10.8%) and France (+6.1%) releasing their numbers this week.
Consumer Price Inflation, Various Countries
Source: FT
The one-month BTC put-call skew, measuring the cost of puts (bearish bets) relative to calls (bullish bets) expiring in four weeks, is rising again, indicating renewed demand for puts.
Source: Skew
Out on the Puell
In July, the Puell multiple, a reliable bottom signal for BTC, fell to 0.34. This is the lowest the indicator has been since 2019. Even as the indicator currently sits at 0.54, values under 0.50 have historically marked price bottoms and are considered good accumulation zones.
This metric looks at the supply side of Bitcoin’s economy — miners and their revenue — exploring market cycles from their perspective. Bitcoin miners are sometimes referred to as compulsory sellers due to their need to cover fixed costs of mining hardware in a market where price is extremely volatile. The revenue they generate can therefore influence price over time. The Puell Multiple is calculated by dividing the daily issuance value of Bitcoins (in USD) by the 365-day moving average of daily issuance value.
In other words, it compares the short-term revenue of BTC miners to its longer term trend. A lower score equates to lower revenue for miners. Since 2014, the Puell multiple has gone below 0.50 only 4 times: during the previous market bottoms of 2015 and 2019, the Covid-induced crash of Spring 2020, and most recently in July 2022.
Source: Delphi Digital
I’m Here For the Art
OpenSeas trading volumes plunged to their lowest level in 13-months on Tuesday. The NFT marketplace handled $6.5mn worth of trades, a fraction of the $204mn executed at its peak in February. The number of transactions has also plunged by two-thirds and active users has also fallen 70% from the heady early days of 2022. Google search for the term NFT has also come off 85%.
OpenSea Historical Activity
Source: DappRadar
Google Trends for Crypto and NFT
Source: Google Trends
OpenSea is not the only platform in the dumps. Volume on NBA Top Shot, Dapper Labs NFT sports series, is down 87% from its high of $3.17mn on April 29th.
Most collections are also off their lofty heights. The floor prices for Bored Ape Yacht Club have plunged 69%, to $129k. Doodles have lost 81% of their value since surging to $67,750. Clone X prices have fallen 82% after peaking at $73k, and Azuki collections have fallen 88% since tagging $108,000 on April 3rd.
Only a handful of collections have posted meaningful gains against ETH in recent months. Blue chip CryptoPunks have risen 82% since May to an all-time high of 83.7 ETH. But they remain down 72% against the dollar.
Diamond Hands Are Forever
Despite the recent fall in NFT prices, the frenzy around meme stocks is back, echoing the headiest highs of last year — and it’s spilling over into meme coins such as Dogecoin (DOGE) and Shiba Inu (SHIB).
The shares of Bed Bath & Beyond (BBBY) surged 400% before falling yesterday. Chain cinema AMC and seminal meme stock GameStop (GME) have also seen a resurgence. AMTD Digital, a Hong Kong-based fintech company, stunned Wall Street earlier this month by soaring more than 32,000% after its Nasdaq debut — surpassing giants including Goldman Sachs and JPMorgan. A university student allegedly made $110mn from trading BBBY.
Recent meme stock frenzy has coincided with a jump in their crypto counterparts. Dogecoin is up about 15.1% this month while copy-cat (dog?) Shiba Inu has gained 23.8%. Shiba Inu’s 40-day correlation with AMC is now at 0.79, up from -0.12 one month ago, highlighting the increased interrelationship between meme coins and stocks as retail traders pile in.
Source: TradingView
Reddit’s WallStreetBets crowd laid low during the worst of this year’s market rout. But a sustained rally on Wall Street since June — fuelled by a stronger-than-expected corporate earnings season — has lured them back.
The market for meme coins may not be wholly based on speculation. The recent launch of DogeChain, a smart contract layer-2 secured on the Doge network, is a positive development. It’s also common for alt-coins to rally on the coattails of ETH. As we approach the Merge retail investors should flock back to crypto with the hype surrounding the event.
Anatomy of a Meme
Meme coins and stocks are useful gauges of animal spirits, and it seems like there’s still quite a bit of money out there that people are willing to risk. The reappearance of meme stock traders however should hint to the Federal Reserve that inflationary pressures are still ballooning — which means expected rate rises may be too low.
In the News…
- Crypto Crime Report: Illicit activity falls with rest of market
- Kraken CEO scorns ‘unconstitutional’ US shutdown of Tornado Cash
- Genesis Trading CEO Michael Moro exits after almost a decade
- BitGo to sue Galaxy Digital for abandoning $1.2bn merger agreement
- Fed opens pathway for crypto banks to tap central banking system
- Token front-running common at Coinbase, new study argues
- Russia plans to roll out digital ruble across all banks in 2024
- Celsius on pace to run out of cash by October
- EU on the verge of creating new AML regulator that will oversee crypto
- Brazil brokerage giant with 3.6mn clients launches BTC and ETH trading
- Crypto.com gets UK regulatory approval
