Casey Wagner

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Phew, it&#8217;s been a week.&nbsp;



Most people expected things to get worse before they got better, and they have. But we’re not calling this the bottom yet.&nbsp;



Here’s a high-level recap, in case you’ve been offline the past few days, or simply avoided checking your brokerage account (probably for the best):



President Trump this week announced sweeping global tariffs of 10% on all imports, and higher levies on 60 or so countries the administration says are the “worst offenders” when it comes to taxing goods the US exports.&nbsp;



These higher tariffs range from 11% to 50%. Countries facing the highest tariffs include Cambodia (49%), Vietnam (46%), China (34%) and India (27%). You can find the full list <a href="https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-I.pdf">here</a>.&nbsp;



His team calculated reciprocal tariffs based on what they are calling the “total sum of all unfair trade practices” by country. Here’s the White House’s formula: a country’s trade deficit divided by its exports to the US multiplied by 0.5.&nbsp;



The math has proven to be controversial. Critics say that this method, in focusing solely on a country’s trade deficit with the US, does not consider (1) the actual tariff rate on any product, and&nbsp; (2) non-tariff trade barriers. The White House conceded that there’s no perfect formula, but it’s the <a href="https://ustr.gov/issue-areas/reciprocal-tariff-calculations">best they could do</a>.&nbsp;



The Trump administration also maintains that the reciprocal tariffs are still less than what other countries charge on US imports, and that these policies are the first step in bringing manufacturing back onshore.&nbsp;



Now for the impact:&nbsp;



Stocks tanked, crypto fell, planned M&amp;A deals and IPOs collapsed, and other countries are striking back.&nbsp;



The Dow Jones Industrial Average on Thursday, the first day of trading post-announcement, lost 1,679.39 points. The S&amp;P 500 yesterday closed almost 5% lower, now down more than 12% year-to-date. US equities as a whole lost more than $3 billion in market value, the worst single-day since 2020.&nbsp;



Fed Chair Jerome Powell on Friday gave no indication that interest rate cuts will come anytime soon, adding to the turmoil in markets. “The economy is still in a good place,” he said, speaking from an event in Virginia. He added, though, that central bankers will be keeping an eye on tariffs.&nbsp;



I wrote yesterday that the IPO window would be closing. Today, Bloomberg <a href="https://www.bloomberg.com/news/articles/2025-04-04/trump-s-trade-war-hits-billions-of-dollars-of-deals-in-24-hours">reported</a> that StubHub, Klarna Bank, and MNTN have all paused their IPO plans. Private equity firm KKR &amp; Co. is no longer considering purchasing German packaging producer Gerresheimer.&nbsp;



Today, stocks extended their selloff and the VIX hit a staggering level just shy of 44, well above the 20-day moving average of 21. The continued decline comes as China announced a 34% reciprocal tariff on US goods starting on April 10.&nbsp;



Trump hasn’t backed down, although his team hasn’t definitively said they are closed to negotiations. I think the biggest concern for markets, though, is that other countries haven’t immediately come forward with offers (that we know of, at least!).



For what it’s worth, Trump and company did say things would get worse before they got better.



Enjoy your weekend. The chaos will still be here Monday.



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Donald Trump

US equities slide as trade war escalates, Powell signals no rate cut

Equities and cryptos have no doubt had a strong start to the year, but analysts urge traders not to bank on a sustained rally.&nbsp;



With the S&amp;P 500 and Nasdaq Composites ending 2022 almost 20% and 34% lower, respectively, investors have welcomed the explosive start to the year. The S&amp;P 500 has gained nearly 8% year-to-date, while the tech-heavy Nasdaq Composite is up close to 15% so far in 2023. <a href="https://blockworks.co/news/crypto-investment-products-see-four-weeks-of-inflows">Bitcoin and ether</a>, which also closed 2022 in the double-digit red, have also reversed course this year, rallying around <a href="https://blockworks.co/prices">36% and 35%</a>, respectively.&nbsp;



But a month and change of positive trading sessions isn’t enough to say markets are definitively in the clear, Jessica Rabe, co-founder of DataTrek Research, said in a note Thursday. If 2022’s returns had not been quite so bad, stocks would have a much better chance of rebounding this year, based on past data, Rabe said.&nbsp;



“After the index is down double digits like last year, the odds of it being positive this year are essentially a coin flip, and the returns aren’t nearly as promising as they would have been had the S&amp;P ended 2022 down less than 10 percent,” Rabe wrote.&nbsp;



Given the uncertainty surrounding the Federal Reserve and its future interest rate decisions, markets are poised for volatility, Rabe added. The Fed is going to keep a close eye on unemployment numbers and job openings going forward to determine if and when slower-paced increases will be warranted, central bank head Jerome Powell has stressed in recent weeks, urging investors to be cautious.&nbsp;



“The reality is we’re going to react to the data,” Powell <a href="https://blockworks.co/news/fed-chair-comments-spawn-volatility">said during an appearance at the Economic Club</a> in Washington, D.C. Tuesday. “So if we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more than is priced in.”



While analysts may be calling for <a href="https://blockworks.co/news/crypto-investment-products-see-four-weeks-of-inflows">risk-off</a> sentiment for markets, so far, cryptos have been able to hold on to gains. Sehaj Singh, an investment associate at Pantera, believes the <a href="https://blockworks.co/news/pantera-says-bull-market-is-here">next bull</a> cycle for digital assets is already here, “regardless of what happens in the interest-rate-sensitive asset classes.”&nbsp;



“The decline from November 2021 to November 2022 was the median of the typical cycle,” Singh said in Pantera’s most recent <a href="https://panteracapital.com/blockchain-letter/the-seventh-bull-cycle/">blockchain letter</a> this week. “This is the only bear market to more than completely wipe out the previous bull market. In this case giving back 136% of the previous rally.”



For now, traders and analysts will be keeping an eye on Thursday’s initial weekly jobless claims report, which showed 196,000 versus the expected 190,000.&nbsp;



Markets should be poised for a higher open, as they want to see claims begin to rise over the coming weeks, otherwise it’ll imply the labor market remains much, much too tight, Tom Essaye, founder of Sevens Report Research, said.



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S&amp;P 500

Analysts Warn Investors to Taper Expectations for 2023 Returns

Michael Bodley

<div id="highlights-block_620596f2ad029" class="highlights">
 <ul>
 <li>The platform has its own native token, MPH</li>
 <li>Morpher now has more than 50,000 monthly users and has settled more than 1 million trades</li>
 </ul>
 
</div>



A blockchain-based platform for trading synthetic exposures to real-world assets has earned the backing of venture capitalist Tim Draper as the firm builds out its business.



Austria-based Morpher raised a $6 million Series A round led by Draper Associates, with participation from RTP Ventures and APEX Ventures, Morpher CEO Martin Froehler told Blockworks. The round brings the startup to a post-money valuation of $33 million.



Morpher employs the <a href="https://cms.blockworks.co/tag/ethereum/" target="_blank" rel="noreferrer noopener">Ethereum</a> blockchain to create virtual versions of stocks, commodities and currencies — without having to hold the underlying asset or transact through intermediaries. One potential application, Froehler said, would be to create an index of housing prices within a specific zip code in the US, without owning any of the property outright.



The trades are executed in the company’s virtual currency, MPH, which the company mines to turn a profit. The company operates its own non-custodial wallet. The idea is to democratize access to investments for those outside of or underserved by traditional capital markets.



“In a nutshell, it’s about access to the markets and liquidity in the markets,” Froehler said.



The platform now has more than 50,000 active monthly users from 100 countries and has executed more than 1 million trades. Froehler plans to use part of the fresh capital to hire eight new staffers on the product and marketing front, aiming to bring staff size to 20 by year-end from its current 12 employees. A mobile app is also in the works.



The plan is to also roll out investments in exotic corners of the financial markets, such as the spot price of cannabis. Morpher doesn’t charge fees on its trades but profits from its tokens.



Froehler, a former quantitative hedge fund manager, said the intent is to ease some of the pain points of traditional finance by offering 24/7, commission-less trades.



“Regardless of where you are in the food chain, trading is always burdensome,” he said. “It is costly. And it is very unfair.”



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business

Crypto Startup That Trades Virtual Versions of Real World Assets Aims to Subvert Banks

<div id="highlights-block_61f8672b1acbf" class="highlights">
 <ul>
 <li>Aurox operates a crypto trading platform that’s akin to a Bloomberg terminal for digital assets</li>
 <li>The company, founded in 2020, now has more than 60,000 registered traders</li>
 </ul>
 
</div>



Cryptocurrency trading platform Aurox is the latest digital asset company to eye an initial public offering.&nbsp;



The plan is for the company to go public in the fourth quarter of this year — though it could happen sooner — Chief Executive Officer Giorgi Khazaradze told Blockworks. Options on the table include tapping investment banks to underwrite a traditional listing, merging with a SPAC, undergoing a reverse merger or going the direct listing route.



Advisors to the company have suggested a listing on the Nasdaq, given Aurox’s technology-heavy makeup, but the company could list on another stock exchange.&nbsp;



Aurox is an anomaly when it comes to crypto startups in that the business. Founded in 2020, it is entirely self-funded, having taken in no venture capital dollars. Khazaradze said the often hefty equity demands imposed by venture capital firms have not been an attractive source of funding for the company.&nbsp;



<div class="wp-block-image"><figure class="alignright size-medium"><img loading="lazy" decoding="async" width="266" height="300" src="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg" alt="Giorgi Khazaradze" class="wp-image-16299" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=266 266w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=910 910w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=1364 1364w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=228 228w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=232 232w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=195 195w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=71 71w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=44 44w, https://blockworks-co.imgix.net/wp-content/uploads/2022/01/Image-266x300.jpeg?w=1368 1368w" sizes="auto, (max-width: 266px) 100vw, 266px" /><figcaption>Giorgi Khazaradze</figcaption></figure></div>



“(Venture capitalists) have so many [stipulations] that they might as well control the company,” he said. “So, you might as well give them 51 percent at that point.”



The company operates what is essentially a Bloomberg terminal for crypto, including support for decentralized finance (DeFi) projects, and oversees its own token. Trades on the platform, which has ties to a number of exchanges, are executed via smart contracts — forming essentially a prime brokerage model for routing DeFi trades. Aurox takes a percentage on every trade made on the platform.



“The more DeFi gets involved into the traditional financial side, the more people will get educated, and the more eyes will come into the DeFi sector of cryptocurrency,”&nbsp; Khazaradze said.



The company now consists of about 20 employees, with plans to hire two or three more developers in short order.&nbsp;



Aurox now has about 60,000 crypto traders the company counts as users, with trading volume eclipsing $600 million last year.&nbsp;



The firm has also explored developing proprietary crypto trading strategies based around high-frequency trading models that could be opened up to outside investors as a hedge fund down the line.



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Aurox

Crypto Trading Terminal Taking Steps Toward Public Listing

<div id="highlights-block_61f84ef6e26a4" class="highlights">
 <ul>
 <li>Bitcoin and stocks rallied at the last-minute Monday, paring losses, but analysts say rough waters may be ahead</li>
 <li>With bitcoin’s correlation to the stock market on the rise, investors should keep an eye on equities</li>
 </ul>
 
</div>



As bitcoin <a href="https://cms.blockworks.co/bitcoin-trading-like-stocks/">continues to move more and more in sync</a> with the stock market, January’s downturn could foreshadow an even larger sell-off, analysts say.&nbsp;



The S&amp;P 500 and the Nasdaq notched their worst monthly declines since the start of the pandemic in March 2020,down 5.9% and 10.1%, respectively. Bitcoin and ethereum posted January losses as well, both down about 19% and 26%, respectively, at market close Monday.&nbsp;



January’s losses would have been even worse if it hadn’t been for Monday’s eleventh-hour rally. Major stock indexes and cryptocurrencies traded higher, with the tech-heavy Nasdaq gaining almost 3.5%.&nbsp;



“Retail investors do not buy every dip — Google Trends analysis shows they aren’t even aware of every dip,” said Nicholas Colas, co-founder of DataTrek Research. “It takes a big selloff after earlier declines to spark interest. That’s what happened a week ago, which was the first time we saw market-related search interest increase this year.”&nbsp;



As bitcoin continues to tighten its correlation with the stock market, lower equities could mean bad news for the cryptocurrency.&nbsp;



“Bitcoin is rallying as risky assets finish a very bad January on a positive note,” Edward Moya, senior market analyst at Oanda, wrote in a recent note. “Bitcoin bullish momentum is slowly building up and it could surprise to the upside if the dollar continues to weaken as much of the Federal Reserve tightening for the year begins to get priced in.”



The most likely scenario for bitcoin, Moya said, is for it to continue to consolidate, but if risk appetite remains firm in February, there could be a lot of money entering the market.



It’s too soon to call the sell-off over, other analysts say, pointing to the Federal Reserve as contributing to volatility.&nbsp;



“For stocks to stabilize and rebound, they need one, the Fed to stop providing hawkish surprises. Two, inflation data&nbsp; to peak and recede. And three, economic data to remain firm to eliminate thoughts of stagflation,” said Tom Essaye, founder of Sevens Report Research. “None of that happened last week, so Fed speak and economic data weighed on sentiment.”&nbsp;



The Fed has put the market on notice that the easy money days of the pandemic are over, but there are other factors at play, too, Colas said.&nbsp;



“While Fed rate policy has been getting all the blame for January’s equity market volatility, there is a fundamental component at work as well,” he said. “Q4 is coming in ahead of expectations but Q1 2022 estimates are going in the wrong direction.”&nbsp;



Marketts are reminiscent of September and October 2021, according to Colas, when volatility also spiked. If the market is going to rally, the next round of earnings reports need to exceed expectations, Colas said.&nbsp;


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5D25E5&#8243; assets=&#8221;^GSPC,BTC-USD,^IXIC&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



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Bitcoin

Bitcoin, Stocks Rebound to End Month, But Sell Off May Continue, Analysts Warn

Ben Strack

<div id="highlights-block_61d7473325b44" class="highlights">
 <ul>
 <li>Bank of America projects Coinbase’s subscription and services revenue to reach 16% in 2023, compared to 4% of total revenue in 2020</li>
 <li>User-created metaverses will be the future of social networks, Coinbase Chief Product Officer Surojit Chatterjee wrote in a Dec. 30 blog post</li>
 </ul>
 
</div>



Bank of America has changed Coinbase’s rating from neutral to buy due to the company’s increasing signs of revenue diversification beyond retail crypto trading.



Jason Kupferberg, a research analyst at the bank, said in a research note that he expects the company’s revenue diversification trend to accelerate in 2022 and beyond. He maintained its price target at $340.



Coinbase’s subscription and services revenue was 12% of its total net revenue in the third quarter of 2021, which was up from 4% in 2020, Kupferberg wrote. Bank of America expects that number to rise to 16% by next year, he added.&nbsp;&nbsp;



Staking, NFT and decentralized finance (DeFi) products will be among the offerings driving Coinbase’s revenue diversification trend, Kupferberg wrote.



Coinbase <a href="https://cms.blockworks.co/coinbase-plans-to-launch-nft-marketplace/" target="_blank" rel="noreferrer noopener">revealed in October</a> that it would launch an NFT marketplace allowing users to purchase, mint, showcase and discover the crypto assets. Kupferberg said that the offering is expected to launch this year.



NFTs will become the next evolution of users’ digital identity and passport to the metaverse, Coinbase Chief Product Officer Surojit Chatterjee wrote in <a href="https://blog.coinbase.com/10-predictions-for-web3-and-the-cryptoeconomy-for-2022-745a20a60cd0" target="_blank" rel="noreferrer noopener">a Dec. 30 blog post</a>.&nbsp;



“Users will come together in small and diverse communities based on types of NFTs they own,” Chatterjee wrote. “User created metaverses will be the future of social networks and will start threatening the advertising driven centralized versions of social networks of today.”



Coinbase also began allowing customers last month <a href="https://blog.coinbase.com/coinbase-makes-it-easy-to-earn-yield-with-defi-bd38156e2715" target="_blank" rel="noreferrer noopener">to earn DeFi yield</a> on Dai, a stablecoin designed to be pegged to the US Dollar.



“In our view, scaling of these non-trading revenue streams could also catalyze increased interest in the stock among institutional investors,” Kupferberg explained. “While uncertainty around regulation remains an ongoing potential risk, we continue to believe that COIN&#8217;s technology, innovation and brand are positive differentiators as more consumers and institutions engage with various parts of the crypto/digital asset ecosystem.”



Crypto is on pace to hit a billion users in the next five years, Coinbase President and Chief Operations Officer Emilie Choi <a href="https://cms.blockworks.co/coinbase-president-crypto-on-pace-for-1-billion-users-within-5-years/" target="_blank" rel="noreferrer noopener">said last month</a> during a webinar at the Bloomberg Financial Innovation Summit.



Choi added that Coinbase would look to buy “incredible companies” that it sees in the crypto space.



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Bank of america

Bank of America: Coinbase Revenue Diversification to Accelerate in 2022 and Beyond

<div id="highlights-block_61d5f93531524" class="highlights">
 <ul>
 <li>Bitcoin and ethereum lost gains following the minutes release, falling 0.8% and 2.6%, respectively</li>
 <li>Federal Reserve officials are starting to backtrack on earlier statements that inflation would be transitory</li>
 </ul>
 
</div>



Federal Reserve officials are becoming increasingly concerned about growing inflation and persisting bottlenecks and supply chain issues, minutes from the Dec. 14-15 Federal Open Markets Committee (FOMC) <a href="https://cms.blockworks.co/fed-gets-hawkish-doubles-taper-signals-three-rate-hikes-in-2022/" target="_blank" rel="noreferrer noopener">meeting</a> reveal.&nbsp;



Economic projections released in September stated that most central bank officials did not anticipate rate hikes until 2023. <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20211215.pdf" target="_blank" rel="noreferrer noopener">Projections</a> from December however show that the majority of officials expect three rate hikes in 2022.&nbsp;



The shift is a hawkish move from the Fed and Powell, who for months insisted that bottleneck-induced inflation would ease naturally over time. The central bank has since backtracked on earlier statements and taken a more aggressive approach to combat higher prices.&nbsp;



“We are phasing out our purchases more rapidly because with elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support,” Powell said during a press conference in December following the conclusion of the two-day FOMC meeting.



<h3 class="wp-block-heading">Markets respond</h3>



Bitcoin and ethereum lost gains <meta charset="utf-8">following the release of the <a href="https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20211215.pdf" target="_blank" rel="noreferrer noopener">minutes</a> Wednesday afternoon, falling 0.8% and 2.6%, respectively.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Bitcoin is in desperate need of a catalyst as crypto traders struggle to buy ahead of the beginning of a Fed rate hiking cycle,” Edward Moya, senior market analyst at Oanda wrote in a recent note. “The cryptoverse remains long-term bullish with Bitcoin and Ethereum but the short-term downward move might not be over.”</blockquote>



Equities also largely fell. The big tech-heavy Nasdaq Composite Index lost 1.4% while the S&amp;P slipped 0.4%.&nbsp;



“Tech stocks remained under pressure after a robust private payrolls report sent Treasury yields higher,” Edward Moya, senior market analyst at Oanda, wrote in a recent note. “Equity traders are still betting on a strong US economy and that has them rotating out of big-tech and embracing cyclicals.”&nbsp;



Gold was trading 0.3% higher Wednesday as the dollar slipped, signaling that Fed rate hikes have largely already been priced in, Moya said.



The minutes come shortly after the New York Fed released its new “<a href="https://fedinprint.org/item/fednls/93594" target="_blank" rel="noreferrer noopener">Global Supply Chain Pressure Index</a>” Tuesday. The index incorporates the Baltic Dry Index, which measures raw material shipping costs, the Harpex Index, which accounts for container shipping rates, and US Bureau of Labor Statistics data. The index revealed that supply chain pressures at at a historic high.&nbsp;



“The data here shows that supply chain pressures remain extremely elevated and, while the Fed thinks the latest reading says the top is in, we are still far from normal’,” said Nicholas Colas, co-founder of DataTrek research. “This tells us inflation will remain an issue for at least several more months.”&nbsp;



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Fed Minutes Show Supply Chain Woes, Inflation Will Drag On

<div id="highlights-block_61d4bf5259ded" class="highlights">
 <ul>
 <li>Analysts say January is the key month to watch when trying to predict end-of-year returns </li>
 <li>If stocks are down in January, “it’s going to be hard for bitcoin to rally,” Nicholas Colas at DataTrek Research told Blockworks</li>
 </ul>
 
</div>



Bitcoin and equities kicked off the second trading day of 2022 higher. Based on recent data, this trend may continue as bitcoin is starting to move more in tandem with the S&amp;P 500.



With January tending to be a key month to gauge how year-end returns might look for equities, cryptocurrency fans should keep an eye on the S&amp;P for clues on how bitcoin could end the year, Nicholas Colas, co-founder of DataTrek Research, said.&nbsp;



“If stocks are down in January, though, it’s going to be hard for bitcoin to rally,” he said.



<h3 class="wp-block-heading">Positive momentum for stocks</h3>



The S&amp;P 500 ended 2021 26.89% higher. Based on historical data, analysts are mostly calling for another year of positive returns, although perhaps not as high as 2021, according to Tom Essaye, founder of Sevens Report Research.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“I imagine that stocks can trend higher, but I don&#8217;t expect another 27% year in the S&amp;P 500, I don&#8217;t think many people do,” said Essaye. “As we sit right now, the fundamentals and momentum are certainly positive for stocks.” </blockquote>



The past nine times that the S&amp;P 500 has posted annual gains of more than 20% have resulted in a positive finish for the subsequent calendar year, meaning there is a good chance that the index will finish 2022 in the green, Colas said.



Jessica Rabe, DataTrek Research co-founder, says the January effect tends to start early in the month. “The S&amp;P is up during the first 5 days of trading during most years, and generates over double the annual return of years versus when it was negative during the first week of trading,” she wrote in a recent report.



Despite starting Tuesday’s session in the green, the S&amp;P 500 was trading down 0.24% year-to-date as of market close on Jan. 4, 2022. Bitcoin was also down about 4% year-to-date.&nbsp;



<h3 class="wp-block-heading">The bitcoin correlation&nbsp;</h3>



The correlation coefficient of bitcoin and the S&amp;P 500 was 0.35 as of Jan. 3, 2022, meaning that the two assets are moving more in sync than typically expected. A coefficient of 1 would mean the assets are moving together, a coefficient of -1 would mean they are moving in opposite directions.



Historically, the correlation between bitcoin and the S&amp;P 500 has fluctuated. Following bitcoin’s 2018 crash, the coefficient dipped as low as -0.22, according to <a href="https://charts.coinmetrics.io/correlations/#435">data</a> from CoinMetrics. During the more recent pandemic-induced sell-off of March 2020, the coefficient rose as high as 0.4



The correlation between bitcoin and the S&amp;P 500 has been trending upward since June 2021.&nbsp;



<figure class="wp-block-image"><img decoding="async" src="https://lh4.googleusercontent.com/pixzEgl0lL-cbAueImhCAojq7UGH3jNFHkGhKnKB3y9_0q1f9Sh4o-oEond4rn9zbSGPv1xkuLlXGtcpeXqsTDO-rdDApOE8x00uCe76sggd1ddh3yG23_fj20QXIixxDnCxv_pb" alt=""/></figure>



<h3 class="wp-block-heading">Bitcoin volatility continues</h3>



Bitcoin ended 2020 more than 300% higher. The largest digital currency’s 2021 gains were a more modest 60%. Large swings in annual returns is nothing new for the digital asset. The token closed 2018 more than 72% lower before coming back in 2019 to rally more than 87%.&nbsp;



“Bitcoin’s volatility? That’s not going away this year,” said Colas.&nbsp;



The key area to watch is going to be the Federal Reserve, Essaye said. Speculative areas of the market, like crypto and big tech stocks, are likely to feel the pressure of higher interest rates and pullback in federal support, he added.



“For the first time since 2018, we enter the year where the Fed is going to be hiking rates and removing accommodation,” said Essaye. “And what does that do to the markets and to the economy? That&#8217;s the million-dollar question for 2022.”



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January Effect? Bitcoin Tightens Correlation with S&P 500

Brianna Beckford

In today&#8217;s episode of &#8220;<a href="https://youtu.be/K7yAAjheOdk" target="_blank" rel="noreferrer noopener">On the Margin</a>&#8221; Weekly Roundup with Mike Ippolito and Mark Yusko, the conversation starts off with Ray Dalio&#8217;s comments about Bitcoin, Gold and Ethereum. Spoiler alert &#8211; minds are being changed! Next they get into the increasing politicization of crypto, and the battle lines being drawn between the Dems and the GOP. 



Mark and Mike get into breadth in the Nasdaq as a potential sign of worry (thanks Bear O&#8217;Shea for the flag!), record stock buybacks amidst insider selling, and finally the growing percentage of net income explained by the stock market.



This week&#8217;s episode on a philosophical question &#8211; is ALL growth just a result of money illusion? For the answer to that, you&#8217;ll have to listen in.



Watch the full episode below! 👇



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<iframe loading="lazy" title="Ray Dalio Changes his Mind on Bitcoin, Stock Buybacks Skyrocket, Everything is Money Illusion" width="1024" height="576" src="https://www.youtube.com/embed/K7yAAjheOdk?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



&#8220;On the Margin&#8221; is a two-part show.&nbsp;Once a week, Mike interviews industry experts, and then at the end of the week, he is joined by co-host Mark Yusko where they break down the top crypto and macro stories. Episodes go live every Wednesday and Saturday morning.



Subscribe to &#8220;On the Margin&#8221; today on <a href="https://podcasts.apple.com/us/podcast/lyn-alden-explains-connection-between-inflation-bitcoin/id1558223079?i=1000513411286" target="_blank" rel="noreferrer noopener">Apple</a> or <a href="https://spoti.fi/3bTa9uw" target="_blank" rel="noreferrer noopener">Spotify</a>, or watch episodes on <a href="https://youtube.com/playlist?list=PLvER9nHSRN3xVs_p-dl7L7K_ZgL6lSudu" target="_blank" rel="noreferrer noopener">YouTube</a>.



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Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a target="_blank" href="https://cms.blockworks.co/newsletter/?source=end" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now. 



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Crypto

Podcast: Ray Dalio Changes his Mind on Bitcoin, Stock Buybacks Skyrocket, Everything is Money Illusion

<div id="highlights-block_60f9d81f0c7a6" class="highlights">
 <ul>
 <li>US stocks plunged Monday before paring losses later in the week, experts say don’t get comfortable, though </li>
 <li>Analysts from Charles Schwab and Guggenheim say a 10%-15% correction is coming in the fall </li>
 </ul>
 
</div>



Monday’s market tumble may be foreshadowing a troubling move for US stocks. Equities are poised to crash 10% or more in the coming months, analysts say.&nbsp;



Charles Schwab&#8217;s chief investment strategist <a href="https://www.businessinsider.com/stock-market-sell-off-charles-schwab-strategist-warns-pullback-sonders-2020-12">Liz Ann Sonders</a> sees a 10% or more correction,&nbsp; according to a recent <a href="https://www.businessinsider.com/stock-market-sell-off-schwab-strategist-warns-full-blown-correction-2021-7">Insider</a> interview.



Scott Minerd, chairman and chief investment officer of <a href="https://www.bloomberg.com/quote/3886462Z:US">Guggenheim Investments</a>, agrees. He sees a 15% crash before the end of October, he told <a href="https://www.bloomberg.com/news/articles/2021-07-21/u-s-stocks-could-plunge-15-in-very-rough-fall-minerd-says?cmpid=BBD072221_MKT&amp;utm_medium=email&amp;utm_source=newsletter&amp;utm_term=210722&amp;utm_campaign=markets">Bloomberg</a> recently.&nbsp;



Stocks bounced back on Tuesday and Wednesday after Monday’s dip, but Sonders and Minerd warn investors not to get too comfortable. Stimulus checks have been sent and the Fed is likely to start bond purchase tapering soon, leaving the current rally without two of its main pillars.&nbsp;



Riskier assets, like bitcoin, are going to see the biggest corrections, the analysts predict.&nbsp;



“We are coming into a seasonally difficult time for risk assets, and there might be a better entry point if you want to get involved in high-yield credit than where we are today,” Minerd said during the interview.



<h3 class="wp-block-heading">Bitcoin bears vs bulls</h3>



Minerd went on to say that he predicts bitcoin dropping as low as $15,000. In past cycles, bitcoin tends to lose 80% during a bear market, but with new competing coins and uncertainty around regulation, there might be a steeper dip coming soon, he said.



Bitcoin fans, however, are still bullish. The largest digital currency rose around 8% Wednesday following <a href="https://cms.blockworks.co/musk-tesla-likely-to-resume-bitcoin-payment-system/">remarks</a> from Elon Musk, Cathie Wood and others at the virtual “The B Word” event hosted by the Crypto Council for Innovation.



Musk admitted to personally holding digital assets and assured bitcoin holders that electric vehicle company Tesla would resume accepting bitcoin soon if mining with renewable energy continues to grow.&nbsp;



“From investors’ perspective, Musk publicly confirming his own exposure to both bitcoin and ethereum for the first time, while also stating that SpaceX also holds bitcoin on its balance sheet, provides renewed confidence in Musk as an advocate for bitcoin,” said Ulrik K.Lykke, executive director at digital assets hedge fund ARK36. “However, the jury is still out on whether this positive spark will bring enough confidence to change the direction of the markets. Investors should still be attentive to the risk and realize that this may indeed not be enough to bend the current downwards momentum.”



In the near term, however, equities are largely safe. Analysts expect a drop to come in the fall.&nbsp;



“Going forward, Covid headlines can still cause volatility, as can earnings warnings about margins or commentary about changes in behavior, but for the most part the macro outlook for stocks and risk assets remains positive in the near term, just like it was before Monday’s drop,” said Tom Essaye, founder of Sevens Report Research.

Analysts See Bitcoin Falling to $15K and Stocks Crashing 15%

<div id="highlights-block_60de100fe3120" class="highlights">
 <ul>
 <li>The S&amp;P 500 index opened at record high Thursday and data showed fewer-than-expected weekly jobless claims on the first day of the second half of the year </li>
 <li>Fundstrat Global Advisors managing partner and head of research Tom Lee increased his end-of-year price target and sees the S&amp;P 500 rallying 7%</li>
 </ul>
 
</div>



Investors are waiting anxiously to see if there is more steam left in the rally for the second half of the year.&nbsp;



The S&amp;P 500 index opened at record high Thursday and data showed fewer-than-expected weekly jobless claims. Energy stocks rose with oil and airline and cruise line stocks rose higher as reopening efforts continued.&nbsp;



After 2020’s 3.5% decline, the US economy is expected to grow 6.5% in 2021, according to FactSet.



Fundstrat Global Advisors managing partner and head of research <a href="https://cms.blockworks.co/fundstrats-tom-lee-bitcoin-is-the-last-thing-you-want-to-put-on-your-balance-sheet/" target="_blank" rel="noreferrer noopener">Tom Lee</a> increased his end-of-year price target Wednesday. He sees the S&amp;P 500 rallying 7% by 2022, putting its 2021 gains at 22%. 



Lee pointed to other examples of years with a high-performing first half. When gains occur in the first six months, they tend to follow in the next two quarters, he said. With interest rates stable, a cooperative Federal Reserve and continued reopening efforts, the market is poised to go higher.&nbsp;



<h3 class="wp-block-heading">2H threats</h3>



There are, however, several threats that could derail the rally in the coming months. Nicholas Colas, co-founder of <a href="https://www.datatrekresearch.com/2h-2021-outlook-inflation-sp-upside-taper-tantrums/" target="_blank" rel="noreferrer noopener">DataTrek Research</a>, pointed to a spike in oil prices, Fed policy mistakes and peak corporate earnings growth as the main areas to watch when anticipating market dislocation. 



A sustainable 50% to 100% annual increase in oil prices historically precedes a stock market decline, Colas said.&nbsp;



“Oil prices fundamentally drive inflation and big spikes in oil prices always cause recessions,” he wrote in a note on Thursday. “Modestly higher crude prices are helpful to the Fed’s goal of convincing consumers and investors that it is serious about seeing sustainable, cross-cycle 2 percent inflation.”&nbsp;



Rapidly rising oil prices will cause inflation to overshoot the Fed’s preferred 2%, Colas said, and also stress American consumers.&nbsp;



“This would be the proverbial ‘rock and hard place’ spot for the Fed,” Colas said.&nbsp;



Colas pointed to former Fed Chairman Ben Bernanke, who’s May 2013 comments about tapering weakened the bull market. All eyes are on the Fed, and any mis-messaging can have swift and significant impacts on the market.&nbsp;



“While we’re at little risk of overtightening just now, the policy miscommunication issue is very much on the table,” Colas said. “Chair Powell has, thus far, managed the messaging around bond purchase tapering quite well… But there’s no historical playbook for a successful tapering discussion – just a list of ‘don’ts’.”



<h3 class="wp-block-heading">Corporate earning watch</h3>



Investors also need to keep an eye on corporate earnings growth in the coming months, Colas said. S&amp;P 500 historical earnings show that earnings rise quickly following a recession, then stabilize and grow at a slower rate before crashing in the next economic downturn.&nbsp;



“We’ve seen the first phase, and the S&amp;P’s string of recent new highs says we’re still in it,” Colas said. “But, at some point we hit phase two and markets then wrestle with what the “right” valuation is for that new environment. While these awkward mid-cycle periods are rarely bull market killers, they can make for very low returns&#8230; and valuations are high enough currently that peaking earnings could be a larger risk than before.”&nbsp;



Investors and analysts are eagerly awaiting Friday’s June jobs report, which will help guide predictions about what to expect from the Fed at the next meeting. Experts agree that at this point, the biggest threat to economic recovery remains the virus and the possibility that the Delta variant may lead to additional lockdowns.&nbsp;

COVID-19

Crash or Rally: What to Expect in 2H 2021

<div id="highlights-block_60d0e6c808c15" class="highlights">
 <ul>
 <li>Retail traders have been drawn to trendy investments in recent months, and some experts believe a major correction is coming</li>
 <li>Michael Burry, who’s early 2000s housing market short trade was featured in the film ‘The Big Short,’ warned in a recent series of Tweets that the &#8220;mother of all crashes&#8221; is coming</li>
 </ul>
 
</div>



Retail traders have been drawn to trendy investments – think Tesla, SPACs, digital assets, environmental, social governance and so-called ‘meme stocks’ – in recent months, and some experts believe a major correction is coming.&nbsp;



Tesla, down about 14% year-to-date, has led the decline. Bitcoin, the world’s largest digital currency, has lost more than 40% in the past three months, but remains up about 10% since the start of 2021.&nbsp;



Michael Burry, who’s early 2000s housing market short trade was featured in the film ‘The Big Short,’ warned in a recent (now deleted) series of Tweets that the &#8220;mother of all crashes&#8221; is coming. &#8220;When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses approaching the size of countries,&#8221; he said, citing the recent fear-of-missing out (FOMO) for unsustainable asset prices, meme stocks and cryptocurrencies. Burry has bet against Tesla.&nbsp;



Robert Kiyosaki, the author of Rich Dad Poor Dad, is in agreement, according to his Tweet below.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Biggest bubble in world history getting bigger. Biggest crash in world history coming. Buying more gold and silver. Waiting for Bitcoin to drop to $24 k. Crashes best time to get rich. Take care.&mdash; therealkiyosaki (@theRealKiyosaki) <a href="https://twitter.com/theRealKiyosaki/status/1406063138995204098?ref_src=twsrc%5Etfw">June 19, 2021</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



The FOMO, Burry fears, has been inflating the market for months, and it’s all too familiar to the late 1999 dot-com bubble burst.&nbsp;



Driven by retail hunger for internet-stock exposure, the Nasdaq Composite swelled 83% from the end of September 1999 to March 2000. We’re seeing a similar situation in clean energy investment vehicles today. Invesco’s WilderHill Clean Energy exchange-traded fund is up more than 124% over the past year, ARK’s innovation ETF is up more than 67%.&nbsp;



“There&#8217;s been many, many historical bubbles, and also just market events that were black swan events,” said Leah Wald, CEO Valkyrie and co-author of Hyperwave Theory: The Rogue Waves of Financial Markets. “There&#8217;s so many events throughout history that were driven by narratives, emotions, that didn&#8217;t follow typical financial market equations as they were supposed to. I think that anytime that there&#8217;s broad market behavioral economics at play and animal spirits, it&#8217;s not a particularly new phenomenon.”&nbsp;



Dallas Mavericks owner Mark Cuban, an early crypto adopter, also issued a warning to investors regarding digital assets. He revealed on <a href="https://twitter.com/mcuban/status/1405306497257586688?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1405306497257586688%7Ctwgr%5E%7Ctwcon%5Es1_&amp;ref_url=https%3A%2F%2Fwww.bloomberg.com%2Fnews%2Farticles%2F2021-06-18%2Fcrypto-meme-stocks-michael-burry-warns-about-mother-of-all-crashes" target="_blank" rel="noreferrer noopener">Twitter</a> that he’d been hit by sell-off of the DeFi Titanium token, part of a stablecoin project called Iron Finance, and he sold. 



Even long-term crypto bulls are growing bearish when looking at the next few months, but the broader market impact is hard to predict.&nbsp;



“I think it may be a rough summer, but I&#8217;m very bullish long term,” said Wald, pointing to the recent mining news from <a href="https://cms.blockworks.co/chinas-qinghai-province-shuts-down-crypto-mines/" target="_blank" rel="noreferrer noopener">China</a> and the impact it will likely have going forward. 



Markets are also feeling the heat from the <a href="https://cms.blockworks.co/fed-keeps-interest-rates-bond-buying-the-same-again/" target="_blank" rel="noreferrer noopener">Fed’s more hawkish</a> stance last week — the hint that officials may raise rates in 2023. But not all economists are as worried as Burry.



Pandemic-related supply chain issues and reopening across the world is playing into prices, and the impending leveling-out will not majorly disrupt markets anytime soon, some believe.&nbsp;



“Last week’s big hawkish shift from the Fed reduces one of the stock market’s biggest tailwinds — unprecedentedly easy monetary policy — but with developed markets reopening after prolonged shutdowns and consumers flush with cash, the global economy should remain strong enough to prevent a broad stock market crash any time soon,” said Matt Weller, global head of market research at Forex.com.



The market can withstand some frothier stocks selling off. Tesla’s plunge, clean energy ETF’s fall and even bitcoin’s halving will not impact the market as much as internet stocks did in 2000 because they represent a smaller portion of the market. 



“Regardless, we’re likely to see isolated mini-bubbles around so-called “meme stocks” and smaller crypto assets in the months to come,” said Weller.&nbsp;

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