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Efficient Frontier

Are tech stocks altcoins?

Published Jan 28 on Substack

Not that we want to divert attention from the last 11 weeks of falling cryptocurrency prices, but looking at some tech stocks is bound to give us some philosophical perspective.

Below: Which one is the Altcoin and which is the tech stock?

Black: Binance Coin, Orange: Netflix. Source: TradingView
A group of altcoins and tech stocks since November 8th. Which are which?

Binance’s BNB token and Netflix are down 36.7% and 43.25% respectively since their all-time peak on the 8th and 9th of November 2021 . Which one has more underlying value?

According to Jurrien Timmer, Fidelity’s director of Global Macro, we’re on the correct side of the macroeconomics.

“Bitcoin clearly got caught in the liquidity storm that is now sweeping the more-speculative side of the stock market. But unlike non-profitable tech stocks, Bitcoin has a fundamental underpinning that will likely get more compelling over time.” he wrote.

Nonetheless, the painful drop, which triggered the worst crypto sentiment in months, created close to $1 billion in leverage liquidations across the cryptocurrency markets, when Bitcoin fell below $40,000.

Daily cryptocurrency leverage liquidation Oct 2021 -Jan 2022. Source: CoinGlass

Bitcoin suffered from a 0.8 correlation with NASDAQ over the last 30 days ,as it did in March 2020, the last time the American stock market acknowledged gravity.

Left: BTC/USD weekly candles. Right: BTC/ISD daily candles. Source: BitcoinWisdom

Since our last edition on January 10th, Bitcoin had a modest rise to $44,500, then drifted down for the next 6 days. On January 20th, after failing to breakout back above $45,500, Bitcoin reversed directions and dropped daily, hitting $32,940 on January 24th before recovering to $37,000 at the time of writing.

Bitcoin funding since March 2020. When the funding is negative, more money is short Bitcoin — when positive, more money is long. Source: CryptoQuant

Sentiment is so negative, that even the funding (the price of going long on Bitcoin’s perpetual swap contract) is currently negative.

With the average holder closer to being underwater than anytime since April 2020, and with $2.8 billion of Bitcoin losses taken on January 21st, it’s not surprising.

The MVRV score estimates the dollar profit or loss the average Bitcoin holds, according to blockchain data. For more informatio Source: GlassNode
Mayer Multiple, showing Bitcoin’s price relative to the 200 MA, hit its 0.8 range, indicating that Bitcoin’s price is attractive. Source: GlassNode

On the positive side, sentiment doesn’t have much lower to go, and… as you’ll read in the next section, the elites have got our back.

Western Elites have crypto’s back

Bitcoin and cryptos started out as anti-establishment technologies meant to protect money from harmful intervention by the powers that be. Has this ethos held up?

Bitcoin and its monetary policy remain decentralized, but it’s interesting to look at the amount of money pouring into crypto from our society’s banking and government elites.

Below are some of the recent developments:

  • BlackRock is the planet’s largest asset manager, whose pedigree includes the execution of the Federal Reserve’s policy and employing former central bankers. Last year they invested $384 million in a Bitcoin mining firm, recently in FTX’s series B round and last week filed Last week it filed for permission to run a “Blockchain and Tech” related ETF.
  • David Pakman ran Venrock, the VC arm of the mega-wealthy Rockefeller oil and banking fortune, for 13 year. Venrock partnered with CoinFund in 2018, and Pakman recently left Venrock to become a full time partner in CoinFund.
  • Famous for “breaking” the pound, George Soros, one of the most successful investors in history, is also known for his involvement in politics and for founding the ECFR. Recently his fund invested in NYDIG and Animoca Brands.
  • Katie Haun is a former federal prosecutor who worked on the Mt. Gox and Silk Road cases. A lifetime member of the mega influential CFR think tank, she became the first female partner of A16Z, heading their second crypto fund. This month Haun left A16Z to raise $900 million for her new Web3 fund.

What do you think? Is this the harbinger of a real paradigm shift? Are our elites trying to make Bitcoin and crypto part of the new establishment, or simply recognizing a good investment opportunity?

Bitcoin mine in the Russian arctic. Source: Bloomberg

News & links

  1. New York’s new mayor takes first paycheck in Bitcoin and Ether. Rio de Janeiro to allocate 1% of treasury to cryptocurrency.
  2. YouTube’s head of gaming leaves to join Polygon Studios as CEO
  3. Singapore bans public advertising of cryptocurrency
  4. BitMEX exchange buys German bank
  5. Putin says Russia has an advantage in Bitcoin mining and should not ban it

Want to join the professional at Efficient Frontier? We’re hiring!

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With over 12 years of high frequency and algorithmic trading experience, our technology powers weekly over $1 Billion of trade. We’re passionate about digital assets and our mission is to bring professional, trusted technology that adds value to the industry and the markets.

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