US Freeway Friday Update — 16 September 2022

Sadie Hutton

Published in

Freeway

11 min readSep 16, 2022

See what is happening in the non-US Freeway ecosystem with the video update below from the global platform.

Click to hear from Sadie and get all the latest from Freeway world.

In this week’s edition of the Freeway Weekly Update, you get an update on a major new Freeway product coming soon to non-US users, plus Freeway’s latest growth stats.

Hey #FreewayFam,

Think ‘the merge’ was exciting? Just wait…

All anyone has been talking about in crypto this week is ‘the merge’.

The merge is a major upgrade to the EthereumⓇ blockchain, that marks a fundamental shift away from the old ‘proof-of-work’ model to a new ‘proof-of-stake’ model, designed to make the blockchain faster, cheaper and more energy efficient to use.

Ethereum co-founder, Vitalik Buterin, called the merge ‘the crypto world’s biggest and most ambitious software upgrade to date’.

Pretty impressive, but what’s this got to do with Freeway, I hear you ask?

Well, everything, because just like Vitalik, we’re constantly innovating at Freeway and thinking of new ways to make our platform and products the best they can be for our users.

Recently, we revealed plans to launch a major new product that will offer our users greater protection, along with the opportunity to earn some of the most generous rewards available in crypto. While this new product will not be available to US residents and citizens, we are working on another product especially for you.

With up to a proposed 15% Annual Rewards available on crypto and stablecoins, and innovative risk management, which is designed to protect the majority of Freeway’s crypto and fiat assets by law — among other measures, our new non-US product should attract plenty of new users to Freeway.

And this week, we have been finalising the legals and fine-tuning the protections aiming to be best-in-class, and we hope to reveal all very, very soon.

If you thought the merge was exciting, wait ’til you see what Freeway has in store….

Freeway’s Latest Growth Stats

There is one stat that really stands out for me this week, and while it isn’t one we normally include in our weekly roundup, it is undoubtedly the most satisfying for Freeway.

Drumroll please…because this week, the total for Annual Rewards earned by Freeway users worldwide has passed $33 million!

Now let’s look at Freeway’s latest US corporate growth figures in full…

US Freeway users = 6,122
US total Supercharger simulations = $33,962,694
US closed-loop FWT staked/held = 695,956,610

Agent Alpha on: US so obviously in recession, they MUST FOLD

Agent Alpha’s statements are solely his own opinions and market commentary, are for entertainment, and are neither endorsed by, nor represent the views of Freeway. You should always do your own research and seek independent expert financial advice.

Markets have been risk off since the US CPI print came in higher than expected on Wednesday. And yet still (and only just) the big levels continue to hold.

For regular readers, the big levels I refer to are the US 10-year nominal yield 3.5% summer high print vs 3.47%, the S&P 3870 support low (right there now) and the DXY index 109.9 vs 110.5 high. I don’t for a second claim that these will continue to hold, but investors should keep a keen eye on these major support and inflection points to determine whether or not asset classes are going to reset to new ranges — or not as the case may be. Always remember that ‘closes’ are all important rather than intradays, as an aside.

With that out of the way, my message today is that the US is so clearly already in recession (and has been frankly for months, frankly), that we MUST keep on asking that perennial question, how long and how far will Powell and the FEDERAL RESERVE be willing to push the pain? Because at the current pace, this policy error is going to spiral rapidly out of control, and the panic when it does will be a sight to behold.

Two charts illustrate this policy error below.

First, as I showed in the midweek Alpha piece, check out the amount of RATE CUTS pricing in, as the RATE HIKE chart goes relatively parabolic. In other words, the market is telling us that when the FED gets to its 4.4% terminal rate sometime in Q1 ’23, soon after it will be slashing back towards 3% into the end of ’23 / ’24, such will be the U-turn.

Second, since the CPI print on Wednesday, the US 2/10 nominal yield spread has now tipped to c. -45bps vs -20bps pre-CPI (negative prints being historically nailed-on recession markers, of course).

What I find interesting is that it is potentially forming a double bottom formation. For this to be the case, and confirm it is indeed a double bottom, we’re going to most likely see a ‘wobble’ from Powell next week at the September FOMC meeting, in terms of his perceived confidence in the presser after the ‘nailed on 75bps’ forthcoming hike.

Which means the next major market event to watch is obviously next week’s FED meeting.

US recession really? I hear you cry!

Ok — fair, so let’s get to the point. Last night, FEDEX, the global logistics bell-weather, traded -18% as it pulled guidance aftermarket (adding to the risk-off weight in markets). The most it has ever traded in its history, in terms of size of fall, since the early 1990s.

The global logistics company said performance is impacted by macroeconomic weakness in Asia and Europe. Consider that this update comes off the back of the last update for the company only c. 2 months ago, and this suggests a dramatic slide in operations, to say the least.

Then to the latest Atlanta Fed GDP tracker for Q3, that last night slashed estimates to 0.5% vs 1.3% prior (itself slashed from 2.7% only a few weeks ago). As I noted before, the Atlanta FED GDP tracker recorded negative Q1 and negative Q2 prints, which the White House went out in full force to insist was definitely NOT an indicator the US was in recession. How are they going to spin another Q in negative territory, as the next Q3 Atlanta FED tracker update in a couple of weeks will SURELY reveal? This will be very interesting indeed!

Recession is already here in the States and I think it has been for months frankly. But this is the key point — as EVER. ‘Get it done already’ because the sooner the FED realises they’ve overcooked it, the sooner they’ll blink and the markets can breathe a sigh of relief that the FED isn’t going to deepen a global calamity that is arguably already in train.

I draw attention from an anecdotal point to this interview yesterday on CNBC from Barry Sternlicht (US Real Estate Billionaire), who said that the economy is already breaking very hard and he sees a major housing crash ahead (as mortgage rates tipped > 6% yesterday on the 30 year rate — I mean who is going to get a 30 year mortgage at 6%!?), and that in real time there are cracks everywhere right now, as the FED is smacking the economy with a sledgehammer, without waiting to see the impact policy moves have already had, which is more than enough.

He also pointed out that the official data driving the FED’s actions was stale and basically unreliable. I would add to that point, that there’s a massive chasm between the NFP vs Household discrepancy of > 1.7M supposedly created jobs that the former says have happened, when revisions will show this to be a complete fallacy! Regular Alpha readers will note I have waxed lyrical about the ‘dodgy’ US employment stats for months now — that will probably be ‘revised’ after the midterms in November — quelle surprise!

Now the bears will rightly say — doh of course the US is in recession and point out that the earnings revisions are about to come in a major way to the downside, coupled therefore with stock multiple contractions that haven’t as yet really even begun. Quite right, that is entirely logical. The bulls cling (as I do) to the dawning realisation that sooner, rather than later, markets will be ‘thinking’ these plunges in real-time data (like this massive FEDEX warning), will make policymakers start to question their confidence in continuing the insane scale of the current hiking cycle, relatively speaking.

Okay, onto some ‘real-right now’ things to get your teeth into, as I see it.

The S&P global proxy index currently sits right on the bottom of the recent support range 3870 (that ‘close’ is all important). Now if this doesn’t hold (and it does display positive divergence already), a further puke lower will only exacerbate that pattern, aka seller exhaustion. I think that is interesting.

If we look within the market it is obvious that there are some interesting divergences.

As Nasdaq trades -7% this week, ‘unprofitable tech’ has notably outperformed trading as an index, and you can classify BITCOIN for example in that ‘batch’.

And if we look at the downside from here in Nasdaq overlaying the relation with the current FED terminal rate, the Nasdaq implies another 1k points or so downside from here max, on the assumption this terminal rate remains where it is now. And it could just as easily start to rise back up on the ‘Powell wobble’ logic I opened with.

I am going to conclude with a REAL YIELD observation: they’re ‘stretched’.

I merely point out how stretched the move in real yields has now become. GOLD, for example, is puking because of this inverse relation, whilst interestingly the digital gold play BITCOIN is actually outperforming, relatively speaking, as it still refuses to pull lower from the c. $20k handle.

Bitcoin vs US 10-year real yield — it seems to me that we’re starting to see real resilience in the digital gold proxy (a perennial optimist I know!).

My conclusion

There is no doubt that the US is in recession and has been for months. Such is the poor nature of official data in terms of lag and quality re: sourcing (as I see it) that this will become so obvious in the months ahead. There is equally no doubt that the FED has already massively overcooked the hiking cycle, without pausing to see the impact of moves already undertaken, which says to me that the risk of pivot (yes as dull as that is) is now higher, in terms of market ‘shock’ when it happens, than ever before.

The real-time metrics such as the Atlanta FED and companies of such importance such as FEDEX warning to such a degree will surely now be giving pause for thought amongst those policymakers, and I think this will provide a tail-risk in next week’s FOMC (75bps hike nailed on now), that Powell in the presser will be interpreted as ‘wobbling’ once again. And if it isn’t giving pause for thought to them? Then I frankly do not know what will, until depression smacks them all hard in the face!

We’re on support/inflection points right now as I type (so may have gone by the time you read) and I am not saying any of these hold. BUT what I am saying is that the momentum metrics are flagging a waning of conviction so watch these accordingly. I am also saying if we consider the FED terminal rate overlay with markets? I think the downside — should support not hold — is now within 5% to 10% from current levels in the coming weeks ahead, which implies late Sept/early Oct could well be the nadir per se.

Finally, I think it’s notable that within the recent market ‘melt’ post CPI print on Wednesday, that elements of the markets (those most risky like unprofitable tech etc), are clearly outperforming. And that whilst real rates continue to become ever more stretched this is also notable, namely that GOLD gets hit, whilst that ‘digital gold’ BITCOIN (so far at least) has not.

Until next time,

Alpha

Tuesday’s AMA on Twitter Spaces

Once a week on a Tuesday at 6pm UTC, Freeway holds a live AMA in the Freeway Telegram channel that gives the community a chance to ask direct questions to Freeway’s co-CEO Graham Doggart.

This week however, our AMA was live on Twitter Spaces. If you didn’t make it, you can still listen to our recording of the live AMA or read our transcript.

Click below to join the official Freeway Telegram group.

If you’d like to participate in the next AMA on Tuesday at 6pm UTC, where you can ask Graham anything, join the Freeway Official Telegram group here.

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Until next week,

Sadie Hutton

Co-Founder and CEO

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