The Byzantine Times
The End of The End of History
Another week has gone by in Corona World and although the actual facts have not changed much, the end of markets and the subversion of price action, analysis, portfolio theory e.t.c. is beginning to be accepted in traditional finance, quite a dramatic acceptance for a conservative crowd who are naturally at odds with this type of conclusion.
We had noted the end of neo-liberal doctrine in this failure last week, which is a failure in its literal sense — the conclusion is something like there being no market at all due to a blind obedience to markets . Deutsche bank strategist George Saravelos wrote a note titled ‘The end of the free market: Impact on currencies and beyond’.
We saw the most powerful man in the world the US President reacting to asset prices constantly the last couple of months and openly appeal to the federal reserve bank to do something. This has somehow become normal expectation, beginning as far back as Bill Clintons White House and Alan Greenspan during the ‘Tequila Crises’.
Our ongoing appeal has been that a cultural trend emerged after the fall of the Soviet Union best embodied in Fukuyama’s ‘End of History’ narrative and that this best summarises the period from the fall of the Berlin Wall until the Coronavirus, the end of, ‘The End of History’.
The Numbers
Reviewing our chart of the numbers for the week we realised the some of the data is incorrect.
We saw equity indices up significantly the last week, up to 12%, Gold has been strong and is at recent highs, Oil and Gas is moving around a lot on expectations from Opec meetings and there has been some significant movement in lumber, cattle and cotton.
The Events
The OPEC negotiations were the biggest events for the week along with the British Prime Ministers Boris Johnson’ admission to hospital.
OPEC agreed to cut oil barrel production into the drop in demand today, an outcome that we thought would be forced by the US one way or another.
Boris Johnson’ admission to hospital might be the high point of the coronavirus outbreak, where his death was a potential reality after the UK had originally talked about developing ‘herd immunity’.
BTC In Focus
Bitcoin has traded sideways over the last 7 days, breaking its up-trend and trading to the underside of that trend-line as resistance today.
Richard Galvin of DACM noted the correlation with equity markets, and perhaps even more interestingly has been that Bitcoin has moved first most times.
Richard notes that the correlation is especially persistent this time and that they do not usually hold for a long time. We think that the correlation was seared into memories as important during the de-leveraging liquidity event.
We had been seeing the support levels in Bitcoin as being especially vulnerable to be targeted and were very early in the call, if the market is actually turning over at all.
Bitcoin / USD on a Daily Chart
Either way, we think that the bullish target is on the other side of the resistance (A) but still like the bearish trade (B) to knock out important and untested price levels (and especially leveraged long positions) taken after the major low was made.
Bitcoin / USD on a Daily Chart
Volumes in Bitcoin are lower but still higher than they had been
Volume per day over the past 30 days
The volume by week shows trade high on average, but having come off a lot in the last month.
Volume per week over the past 6 months
Bitcoin is still in extreme fear according to the fear and greed index, which it hasn’t really moved off of during this period.
This sentiment over time is interesting (below). Bitcoins fundamental story is the most relevant it has been today since it was created yet it doesn’t even believe its own raison d’etre.
Since the global de-leveraging, risk-off liquidity event Bitcoin has been utterly spooked and is clinging to equity prices.
This low sentiment is during a time that prices have bounced ~ 75% from their lows.
We had a look back through the history of sentiment and found a similar patch. What is interesting between the two times is that both are when the price is forming a low. This time around the low being made is giving bullish indications of what it wants to do after it has completed its ritual.
Alt-Coins
A brief look at Bitcoin dominance in the sector over the last 3 years shows that Bitcoin dominance had been quite high and is perhaps rolling over a little compared to the alts.
Indeed, Ethereum and Link had both been major overperformers the last week, with a 20% price break-out in Ethereum and something like a 40% move in ChainLink, which is still being bid after weakness in the overall story. More on ChainLink here.
US Dollar
The US Dollar has retreated from its trend-line, coinciding with the risk-on trade for the week. After peaking in panic, the US Dollar will be one to continue watching, having perceptibly made a high, and also beginning to collapse before the global liquidity event demanded US Dollars throughout the financial system.
Now with trillions of dollars in extra liquidity including swap-lines between central banks we will watch closely to see what happens next.
Gold
Gold has been edging towards proving whether the supply-shock narrative is real or not, with the paper market above the highs and the spot market just about on its high.
The story is that it is particularly difficult to procure at the moment and whether that is due to it being bought or supply lines being restricted is part of the calculations of Gold traders. It is conceivable that this nuance does not count for much if the price gets much higher.
Silver : Gold Ratio
This ratio had become interesting recently due to it experiencing an all-time high a month ago.
With the silver/gold ratio as the social definition of what constitutes money, and us approaching a money crises it is something interesting to look at, regardless of whether silver is ever accepted for its monetary value again or not.
The blue line is the long-term average of the ratio before bank-notes were invented.
We might include fiat, gold, Bitcoin and oil as potential sources of what we consider money in the future.
