Investment review for the 29th week of 2022

Stocks

• ETF SPY (S&P200 index): +2.59% (+$9.96).

The US stock market showed good growth last week. The main news was company reports; the above-expected words were from IBM, Goldman Bank Sachs, Berkshire Buffett Foundation Hathaway, Johnson & Johnson, Tesla, Philip tobacco company Morris, telecommunications giant AT&T, and many others. On the other hand, relatively weak reports from Bank of America and Netflix, the social network, are very weak Snapchat. The IT giants are reporting this week, and the SNAP results don’t provide much optimism for tech companies.

On July 27, 2022, the Fed is expected to raise the rate. But, again, there should be no surprises: there will be a 0.75% increase with a 75% probability that this information is already in prices.

Cryptocurrencies

• ADA Cardano: +3.50% (+0.59$);
• BNB Binance Coin: -1.63% (-0.66$);
• BTC Bitcoin: -0.84% (-0.62$);
• DOT Polkadot: -4.57% (-0.39$);
• ETH Ethereum: +3.71% (+2.99$);
• NEAR Protocol: +3.56% (+0.30$);
• SOL Solana: -6.88% (-1.29$).

Last week, Bitcoin quotes reached more than $24,000, but the price has already rolled back to $22,000. The news about the debts of various crypto funds continues to come in – the chain reaction after the collapse of LUNA continues to this day. Also, many reports of staff cuts – crypto companies are trying to save money amid a market collapse.

Vitalik Buterin (founder of Ethereum), at a conference in Paris, presented a plan to achieve a throughput of 100,000 transactions per second (currently about 15). The stages of the program are known to those who follow the project – it is the transition to Proof-of-Stake (in September 2022) and the introduction of sharding. It is also worth noting the desire to reduce the emission of ETH further – this is one of the factors in the long-term price growth. Buterin admits that it is tough to develop Ethereum – the network has grown dramatically and is operating at the limit of its current capabilities.

Algorithmic stablecoin USDD almost recovered to $1 in “only” 45 days. Unfortunately, the product is a failure at this stage – even in extreme market conditions, the stablecoin should keep the price or recover quickly.

Precious metals

• Gold (PAX Gold): +0.72% (+$2.27).

A slight increase amid the introduction of the seventh package of sanctions, which prohibits the purchase of Russian gold and jewellery.

Deposits

• UAH ( Monobank 9.22%): -19.43% (-152.63$);
• BUSD ( Binance USD 10-13%): +0.21% (+0.61$).

 The NBU lowered the official hryvnia exchange rate by 20% – from UAH 29 to 36 per dollar. The exchange rate in exchangers was approximately the same, so nothing shocking here. Such heavy losses are indeed due to the war – the Ukrainian economy is suffering due to Russian aggression. The deposit works until December, so the rate does not collapse, but it is quite possible.

Week 22-24.07.2022 (No. 29)

Name of the asset (group)	For 20 22, %	18.07.22 USD	Portfolio share, %	Week, 23.07.22	USD profit	Profit, %
INVEST. PORTFOLIO USD	-20.55	2718.07	100.00	2579.20	-138.88	-5.11
Shares ETF SPY(Index S&P500)	-16.57	385.13	14.17	395.09	9.96	2.59
Deposit BUSD Binance USD	5.60	28 6.45	10.54	287.06	0.61	0.21
Deposite Monobank UAH	-21.22	785.36	28.89	632.73	-152.63	-19.43
Precious metal PAXG Pax Gold	-5.74	315.70	11.61	317.97	2.27	0.72
Crypto AD Cardano	-59.53	1 6.80	0.62	1 7.39	0.59	3.50
Cryptobnb  BinanceCoins	-48.59	40.65	1.50	39.99	-0 .66	-1.63
Crypto BTC Bitcoin	-47.67	72.81	2.68	72.20	-0.62	-0.84
CryptoDOT  Polkadot	-72.25	8.35	0.31	8.65	0.30	3.56
Crypto ETH Ethereum	-54.75	80.54	2.96	83.5 3	2.99	3.71
Crypto NEAR Protocol	-56.77	8.35	0.31	8.6 5	0.30	3.56
Crypto SOL Solana	-74.76	18.79	0.69	17.50	-1.29	-6.8 8
CASH in reserve	0.00	698.96	25.72	698.96	0.09	0.00

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Will a short Bitcoin squeeze avoid the $20,000 trap?

The largest cryptocurrency, Bitcoin, showed vital signs of recovery after the consolidation phase at around $20k. However, network data shows that Bitcoin funding rates have plunged to harmful levels. It could lead to a potential short squeeze, which would affect the price of BTC.

The Funding Rate measures the recurring commissions between traders trading bitcoin futures (longs and shorts). There are more shorts on the market now; hence the overall sentiment is bearish. It is evident that futures traders accumulate short positions in the market.

But how will BTC behave at a price of around $20,000? An analyst at CryptoQuant pointed out that BTC may slightly increase in the short term due to current funding rates.

A similar picture is in the chart above, where the funding rate has reached a relatively low level. There, the price surged and caused a short squeeze, further increasing its volatility.  

A temporary condensation occurs when there is a massive liquidation of shorts due to a sudden sharp price swing.

It is noteworthy that 24,160 shorts were liquidated in the last 24 hours, and the total liquidation amount was $79.26 million. As a result, on July 2, the cryptocurrency market recorded more than $250 million in losses.

If we compare the two trends above, we can conclude that price fluctuations can cause a contraction, which will bring some relief.

Over the past half month, the price of BTC has fallen to $18-21 thousand. In June, both markets saw a spot at -30% and derivatives at -11%.  

The entire financial market looks forward to the Fed’s reaction to inflationary pressures. But, be that as it may, one thing is clear – small or large, BTC holders continue to support the most prominent cryptocurrency.

In the first half of 2022, addresses containing less than 1 BTC replenished their balance intensively. And what is characteristic is that small investors added 113,884 BTC to their assets during the specified period.  

Investor predicts Ethereum supply shock   

Prominent investor Raul Pal believes that Ethereum (ETH) is in for a supply shock, which will help the asset show higher returns than Bitcoin.

Ethereum’s switch to a Proof-of-Stake model will remove significant selling pressure as the coins are withdrawn from the market and placed in staking, he said. Ethereum will also benefit from the absence of miners, who often depreciate the asset, selling it to cover operating costs:

“We are facing a supply cut of monumental proportions. There will be no more miners who often sell about 80% of what they mine to finance their activities. It reduces pressure on the market by $1-2 billion per month.

There is currently around 9% of the ETH supply staking, and volumes could rise to about 30%. 30% staked ETH are dormant coins. It cannot use in DeFi protocols or Ceci projects for shorting or providing liquidity. All of this will generate a considerable supply shock.”

Pal believes that ETH could become a deflationary asset after the merger and likened its future tokenomics to share buybacks, increasing demand and decreasing supply.

In his opinion, the ETH/BTC pair is poised to break through a multi-year down channel, making ETH a much more exciting bet for macro investors:

“If you look at the ETH vs BTC chart, you can expect a downtrend breakout soon. I have an overweight portfolio favouring ETH, which has paid off well. I look forward to another round of growth. Now I’m more interested in ETH than BTC”.

What’s going on in the stock market?  

During the last six months, when the old phase of falling markets took place, some sectors still supported the indices from an even more significant drawdown; these sectors were oil and gas and other value companies. Growth companies, on the other hand, have been the most affected, as inflation and expensive loans hit them much harder, and therefore, many of them have fallen by 50% -80% over the past year.

But now, this trend may be changing because the US economy is sliding into recession; this is evidenced by GDP, consumer indices, business activity indices, the spread between short and long bonds, and much more. In addition, due to the risk of a recession, we see a drop in commodities: oil, agribusiness, and metals, and this causes a decrease in the value of companies that have supported the indices lately. For example, the oil and gas ETF (XOP) has fallen 32% over the past month.

At the same time, the market has not fallen over the past month but is kept at about the same level. The fact is that now it is beginning to be supported by the “growth companies” that have fallen by 50-80%.

For example, the biotech ETF (XBI) is up 30% this month. The fact is that the market is already embracing the very recession, as well as possible incentives to get out of it, so now they are recouping on those companies that need them the most, and large companies with real business are sliding into a recession.

However, all of the above shows what is happening globally in the markets and can wait for us in the medium term. But in this period, everything can be different; for example, today, inflation data is released, and if they are higher than the forecast, then this is no longer a recession but stagflation. At the moment, it turns out to be a completely different story. But on the horizon of several months, such a scenario looks most likely so far.

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