‘It’s a Bloodbath’: The Crypto Crash Is Real

May 12, 2022

Observations & Insight

The Options Clearing Corporation (OCC) has an interview with David Hoag, OCC’s CIO, in Crain’s Chicago Business today, in which he talks about his career in financial technology and the transformation of the derivatives market infrastructure. You can find the interview here. ~SR

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Lead Stories

‘It’s a Bloodbath’: The Crypto Crash Is Real; Bitcoin has shed more than half its value and a multi-billion-dollar “stablecoin” has imploded, but investors aren’t buying that crypto is dead.
Ekin Genç – VICE
Volatility is the bread and butter of the cryptocurrency market. But these days it’s in absolute shambles as Bitcoin, the largest cryptocurrency that the rest of crypto market tends to tailgate, keeps plummeting partly because it’s heavily correlated to the stock market—also in shambles—and partly because a long-feared crypto timebomb called Terra-Luna has just exploded.
/jlne.ws/3Lbnn4e

The Fed Has Gone From Friend to Foe From Investors. What to Do Now.
Steven M. Sears – Barron’s
Jerome Powell’s recent news conference lingers like a traumatic Zen koan. The Fed chairman said one thing, but what if it means something else and even he doesn’t realize it?
Powell affably told the reporters who follow him around that the Federal Reserve isn’t actively considering an interest-rate hike of three-quarters of a percentage point. Beginning the next day, the stock market has convulsed sharply lower as if the vast majority of investors think he cannot control inflation with only half-point rate hikes. The Cboe Volatility Index, or VIX, has surged above 30, a level that reflects widespread fear that the S&P 500 index will keep falling over the next month.
/jlne.ws/3FI4KDK

Retail traders no longer ‘buyer of first resort’ as US stocks slide
Madison Darbyshire and Nicholas Megaw – Financial Times
The river of retail money that once sustained US stock markets has slowed to a drip.
Equities indices are headed for their sixth straight weekly fall in a row, with the S&P 500 off 17 per cent so far this year and the Nasdaq Composite down by 27 per cent.
/jlne.ws/3FE34v4

Stock Market Selloff Shows Investing Frenzy Nears End
Michael Mackenzie – Bloomberg
Anyone checking their investment accounts at the moment will presumably recoil in shock—and then think about putting more money to work.
After all, history reveals periods of intense Wall Street fear are ultimately good buying opportunities, a pattern that’s duly nurtured a generation of investors primed to “buy the dip” during major equity and credit market routs. One of the most memorable, short-lived dips in asset prices was the pandemic low of early 2020, and that’s a good starting point for investors trying to make sense of what ails markets today.
/jlne.ws/39g9lRu

A Recession Is Already Here, Top Hedge Fund Manager Says
Tae Kim – Barron’s
A well-known technology hedge fund manager is licking his wounds and preparing for difficult times ahead.
On Thursday, Altimeter Capital founder Brad Gerstner admitted he got the stock market wrong in 2022 and believes the economy is undergoing a slowdown.
“If you owned growth stocks this year—like we did at Altimeter—you got your face ripped off,” he wrote on Twitter. “Markets moved fast—we moved too slow.”
/jlne.ws/3FCKLXj

The Tech Selloff Is Ugly. But the 2000 and 2008 Crashes Were Far Worse.
Evie Liu – Barron’s
Technology stocks were some of the biggest victims amid the recent market rout. But they still have a long way to go to match their troubles in 2000 and 2008.
The S&P 500 has tumbled 18% from its peak on Jan.3. Investors are anxiously watching whether the benchmark will keep sliding into a bear market, which takes a 20% drop.
/jlne.ws/37E6bqk

Global shares slide, dollar hits 20-year high on inflation fears
Elizabeth Dilts Marshall – Reuters
Global shares sank to their lowest point in 18-months on Thursday while the dollar hit a 20-year-high, as investors feared that inflation pushing up interest rates will bring the global economy to a standstill.
/jlne.ws/3w8jdpr

Stocks Drop as Inflation Worries Weigh on Markets
Anna Hirtenstein and Hardika Singh – WSJ
U.S. stocks dropped Thursday, extending a streak of volatility in a market driven by worries that the Federal Reserve will hamper growth in its effort to bring inflation under control.
The S&P 500 declined 1.8% after the broad-market index closed down 1.6% on Wednesday. The Dow Jones Industrial Average fell 1.8%, or 573 points. The Nasdaq Composite Index declined 1.9%. All three indexes are on track for weekly losses of more than 4.9%.
/jlne.ws/3FI6s88

Exchanges

Cboe Global Markets Announces 2022 Annual Meeting Results
CBOE
Cboe Global Markets, Inc. (Cboe: CBOE), a leading provider of global market infrastructure and tradable products, today announced the preliminary shareholder voting results from its 2022 Annual Meeting held today.
All 14 board of director nominees served on the 2021-2022 board term and received a majority of votes cast.
/jlne.ws/3Mcplm6

CME Group Chairman and Chief Executive Officer Terry Duffy to Appear Before U.S. House of Representatives Agriculture Committee
CME Group
CME Group Chairman and Chief Executive Officer Terry Duffy will appear at a hearing of the House Agriculture Committee on Thursday, May 12 to review an FTX proposal to launch an altered clearing model that could inject significant systemic risk into the U.S. financial system.
/jlne.ws/3L8onpY

Amendments to the Operational Clearing Procedures (the “Procedures”) for Options Trading Exchange Participants of The SEHK Options Clearing House Limited (“SEOCH”)
HKEX
SEOCH Participants are requested to note that the Securities and Futures Commission has approved amendments to the Procedures of SEOCH for the purpose of implementing changes to the membership composition of the Participant Admission Appeals Committee of SEOCH.
/bit.ly/3l4TuYO

SGX Group reports market statistics for April 2022
SGX
– Record volume in derivatives market
– STI is world’s strongest performing developed-market benchmark
Singapore Exchange (SGX Group) today released its market statistics for April 2022. Derivatives trading volume rose to a record amid macro uncertainties, while the continuing Russia-Ukraine conflict drove hedging activity in freight.
/bit.ly/3wgsX1f

Regulation & Enforcement

SEC Chair Calls for Comprehensive Rules to Be Applied to Digital Assets
Ana Alexandre – FX Empire
Gary Gensler, Chairman of the Securities and Exchange Commission (SEC) has underlined the need for comprehensive rules to be applied to digital assets. In a speech on reducing risk and increasing transparency of derivatives, during the International Swaps and Derivatives Association Annual Meeting on Wednesday, Gensler said most cryptocurrencies constitute securities as the current administration looks to regulate digital assets.
/jlne.ws/3Mbz3Fr

Strategy

The ‘Fed Put’ Has Finally Expired. What Investors Should Do Now.
Steven M. Sears – Barron’s
Jerome Powell’s recent news conference lingers like a traumatic Zen koan. The Fed chairman said one thing, but what if it means something else and even he doesn’t realize it?
Powell affably told the reporters who follow him around that the Federal Reserve isn’t actively considering an interest-rate hike of three-quarters of a percentage point. Beginning the next day, the stock market has convulsed sharply lower as if the vast majority of investors think he cannot control inflation with only half-point rate hikes. The Cboe Volatility Index, or VIX, has surged above 30, a level that reflects widespread fear that the S&P 500 index will keep falling over the next month.
/jlne.ws/3ssvKSE

The S&P 500’s charts are pointing to more stock-market losses
Lawrence G. McMillan – MarketWatch
This past week, the S&P 500 index plunged to new relative lows. It is now trading at prices last seen in March 2021. This latest move downward violated support at 4100-4200 and prompted a swift move down toward possible support at 3900. The next support area below that is 3700 – the lows of February and March 2021.
/jlne.ws/39iszG7

Wheat Crops Almost Everywhere Are Coming Under Threat
Megan Durisin, Kim Chipman, Jen Skerritt, and James Poole – Bloomberg
As Russia’s invasion chokes off Ukrainian wheat exports, pushing up bread and noodle prices, the global harvest faces an added test: extreme weather.
Droughts, flooding and heatwaves threaten output from the U.S. to France and India, compounding shrinking production in Ukraine. Just about every major producing region is facing one threat or another. The one notable exception is Russia, which is shaping up for a bumper crop and stands to benefit from the rising prices and limited supply elsewhere.
/jlne.ws/39iWn5q

Investing Amid Market Volatility (Radio)
Bloomberg (Audio)
Veronica Willis, Investment Strategy Analyst at Wells Fargo Investment Institute, discusses investing, markets, and inflation in 2022. Hosted by Paul Sweeney and Matt Miller.
/jlne.ws/3FCJZcR

Bigger Chunks Are Getting Hacked Out of Post-Covid Stock Bull Market
Vildana Hajric and Lu Wang – Bloomberg
Every day another pillar falls in the advance that sent equities skyward in the months after the coronavirus outbreak.
Down 1.65% Wednesday, the S&P 500 has given back well over half the gains it booked since lockdowns began in earnest more than two years ago. Losses are worse away from the major benchmarks. Banks, cruise lines and homebuilders are flat to lower compared with their levels of February 2020. Even Amazon.com Inc., Walt Disney Co. and Netflix Inc. now trade for less than before Covid hit.
/jlne.ws/3w7bQi4

Metal Demand Seen Surging for Decades on Strength of Energy Transition, World Bank Says
Elizabeth Elkin – Bloomberg
Demand for metals used in everything from wind-turbine blades to batteries will surge for decades to come, driven by efforts to decarbonize the global economy and shift away from fossil fuels, according to the World Bank.
Even as consumption growth for other commodities like grain probably will trail off in the next 30 years, metals will remain in high demand, delivering “windfall gains for countries that export them,” the bank’s economists wrote in a report released on Thursday. The adoption of low-carbon power generation “implies a permanent increase in demand for copper, nickel, cobalt, and lithium, and an eventual drop in the use of fossil fuels.”
/jlne.ws/3w6wWx0

Mitigate Risk in the S&P 500 and Derive Income From This ETF
Nasdaq
In a risky market environment like today’s, it’s imperative to get proper hedging, but with safe haven assets like bonds heading lower, it helps to get strategic. This is where investors can benefit from an exchange traded fund (ETF) like the Global X S&P 500 Risk Managed Income ETF (XRMI), which has a built-in hedging component.
/jlne.ws/3waQb8Y

Miscellaneous

Crypto Winter May Be Harsh for Coinbase; The company plans to invest even if crypto activity continues to fall, but investors may not have the same patience
Telis Demos – WSJ
The weather is getting warmer outside, but Coinbase Global is settling in for a tough winter. Even before the drop in the price of bitcoin and other cryptocurrencies this month, Coinbase was recording a big decline in activity on its platform in the first quarter, the company reported on Tuesday. The number of monthly transacting users fell more than 2 million from the fourth quarter to the first, to 9.2 million. Trading volume slid by 44% over that period and total transaction revenue was 56% lower. The company said crypto volatility continued to decline into April, hitting the lowest level since mid-2020, and it expects lower monthly transacting users and trading volumes in the second quarter.
/jlne.ws/3w5fmtc

The mystery of the mogul, the casino and the heist that rocked Mayfair
Miles Johnson – Financial Times
Just before 10am on a rainy June morning, a lone man wearing a black balaclava and a blue boiler suit approached the brass-plated entrance of the Park Lane Club in London. The man carried a dark bag up the marble and gold-fronted staircase inside and barged into the casino’s reception area. When a chauffeur who was waiting at the front desk began to shout at him, the intruder paused, making a silent but unmistakable gesture with his hand: he was armed, and this was a robbery.
/jlne.ws/3woJr67

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