Week of Tuesday November 30th to Monday December 6th
Market Commentary 💬
Announcements 📣
Announcing our Savings rates as of December 1st, 2021.
The interest rates for our Bitcoin and USDC Savings Accounts will remain the same, with the first tier in the Bitcoin Savings Account moving to 0.5 BTC.
Bitcoin first tier (balances up to 0.5 BTC): 6.25% APY
Bitcoin second tier (balances above 0.5 BTC): 2.25% APY
USDC (all balances): 9.5% APY
We pride ourselves in offering market-leading rates, while ensuring that the same are sustainable for the long-term benefit of our clients and our business.
One Bitcoin Giveaway 🎁
Today is the last day to participate in the 1 BTC Giveaway! The winner will be announced tomorrow through our Social Media.
Invite others and get $50 USDC 💸
Refer a friend in December and you can each earn $50 USDC!
For the month of December, our referral program will increase from $10 USDC to the referrer and referee to $50 USDC each. That means that when you refer a client to Ledn and he or she funds their account, both of you can receive $50 USDC. Conditions apply, check our Terms & Conditions for full details.
Bitcoin 🟠
Bitcoin had a very volatile Thanksgiving week, dropping by almost 11% on Friday, but bouncing back over the weekend to close the week down just -2.98% at $57,338. It has shown some continuation to the upside on Monday.
As we described last week, Monday’s price action could be very telling as to how U.S. investors are positioning their portfolios to close out the year.
Looking at the options flow from Monday, it shows that there are more put contracts being sold than bought, and that more call contracts are being bought than sold. Both of those are bullish in positioning.
Some of the optimism could be stemming from the conviction displayed by Microstrategy, who announced on Monday that they had “bought the dip” yet again.
Mr. Saylor’s company purchased an additional 7,002 bitcoin to add to their stack. They now hold 121,044 bitcoins worth about $3.6 billion, with an average purchase price of about $29,534 each.
Last week the news also broke that another big name had been accumulating bitcoin through GBTC.
As per a filing from last Tuesday, Morgan Stanley revealed that they had increased their GBTC positions across a series of funds. In the last 3 months, Morgan Stanley funds have collectively added more than 2,648,372 units of the fund, amounting to over $121 Million. The funds collectively now hold approximately $303 Million.
Data from the Bitcoin blockchain is also consistent with the headlines.
We can see in a chart courtesy of @RealPabloHeman that the number of addresses holding over 100 BTC has actually been increasing as the price has been dropping.
Another great chart shared by @therationalroot last week shows where bitcoin is trending relative to previous halving bull cycles.
Previous cycles have also seen a dip or correction before ending up with a strong run. The chart above suggests that, if history rhymes, we could be entering a few good months for bitcoin in terms of price.
S&P 500 📊
It was a wild holiday week in the markets last week. The S&P 500 (and pretty much everything else), dropped significantly on Friday and closed the week -2.52% at 4,583. As we mentioned last week, price action from Monday would be very telling, and we’ve seen markets almost erase Friday’s losses entirely.
It feels as though what we saw on Wednesday was just a “Turkey Shakeout”. Despite the selling panic from Friday, investors could have reflected on the fact that inflation could eat their portfolios and they’d rather be into stocks that feel overpriced instead of holding cash.
There have been a few red flags for continued asset price inflation, and food inflation in the U.S.
One of them is what we are seeing in the U.S. real estate market. According to the most recent Pending Home Sales report from Monday, sales jumped by +7.5% - the median analyst estimate was +1%.
Demand continues to soar and supply continues to dwindle. If pending home sales are any indication, the real estate market will likely remain very hot to the end of the year.
On a different, but related note, Senator Elizabeth Warren called for a probe into turkey costs as prices soared.
While the irony of printing trillions of dollars, injecting them into the economy, and later complaining about rising prices is poetic, what is not so pretty is the fact that probing rising food prices is typically a forbearer of more inflation to come. This is the type of fear that drives people to pile into the stock market and the housing market, to protect the purchasing power of their savings.
To highlight just how tight the correlation between fresh new money and “economic prosperity” is, consider the graph below.
Notice how markets tend to rise when the Fed’s assets rise. The Fed’s assets grow as it prints money and purchases Treasury bonds from the U.S. treasury - effectively lending cash to the U.S. government.
Gold 🥇
Gold dropped heavily last week, like many other assets - closing down -2.91% at $1,791/oz. And while many other assets bounced back to recoup their losses on Monday, gold did not.
While gold has typically been seen as a good inflation hedge, there are a few trends working against it.
For one, the U.S. dollar continues to strengthen. It has rallied +4.45% since the start of September.
Yields on U.S. Treasury bonds also dropped significantly last week on fears of the new COVID variant, but have since bounced back and look poised to resume their trend.
DeFi 🔄
It was a rollercoaster week for the DeFi index, as well as Ethereum. The DeFi index closed last week down -8.27%. Ethereum was one of the few assets that closed last week in the green, finishing up +0.82% at $4,300.
As we have highlighted here in the past, the recent rally has favoured Layer 1 protocol assets, like Bitcoin, Ethereum, and Solana - and second layer tokens, such as Compound, Aave, Uniswap, etcetera, have been out of favour.
If we take an efficient market hypothesis view on tokens, and realize that most of them don’t give the token holder any legal rights on any legal assets, it is easy to think that these tokens’ value is set to go to zero.
Over the last 6 years, we have seen that, while the names of the tokens and projects change, there continues to be a thriving market in alternative tokens.
Again, while this may not make sense from an efficient market view, it may make more sense if we reframe our view of the activity.
The first casino in human history was created in the same century as the first stock market. One could argue that stock markets provide more positive externalities to a society than a casino. Throughout history, humans have willingly walked into a casino and gambled their money away knowing that the odds were stacked against them.
Under this lens, the fuel that keeps these token markets going is greed. And that is a fire that has been burning throughout history. So much so, that societies have had to step in to reign in some of the negative externalities.
Difficulty Commentary ⛏
The most recent difficulty adjustment came into effect last Sunday, dropping difficulty by -1.49% to 22.34 THs.
This is the first negative difficulty adjustment since July of this year when the Chinese crackdown ended.
It makes sense as we have now regained almost all of the hashpower that was deployed back in July.
Adding additional capacity may take more time, but all signs point to continued healthy growth in the hashrate.
The mempool continues to be clear - transaction processing times and cost are at optimal levels.
What's ahead for the week 📰
Yesterday Jack Dorsey announced that he would be stepping down as the CEO of Twitter. Why this is important is because he is still the acting CEO at Square - which is heavily involved with bitcoin and has announced many bitcoin-native initiatives.
Jack could be transitioning to focus entirely on building Square, and contributing to bitcoin adoption. Most of Square’s bitcoin-related projects, as announced, are scheduled to be open-source. This could provide the infrastructure for entrepreneurs around the world to bootstrap new projects and liquidity. It will be a fascinating journey to watch.
As always, we wrap up with a summary of the upcoming economic data and earnings reports for the week:
The week ahead is filled with economic indicators and Fed speeches. Full details ahead!
Tuesday:
9 AM EST - S&P Case Schiller Home Price Index for September. In the month of August, home prices in the U.S. were up 19.8% year-over-year. Given the recent number of pending home sales, it would not be surprising to see an even larger annual increase for September.
10 AM EST - Fed Chair Powell and Treasury Secretary Yellen testify on the CARES Act
1 PM EST - Fed Vice Chair Clarida and Cleveland Fed President Mester speak
Wednesday:
8.15 AM EST - ADP employment report. Expectation here is for an increase of +450,000 new jobs. The previous month generated 571,000 new jobs - it will be interesting to see if growth in the U.S. job market tapers.
10 AM EST - Fed Chair Powell and Treasury Secretary Yellen testify on the CARES Act
Thursday:
8.30 AM EST - Atlanta Fed President Raphael Bostic speaks on housing prices
11 AM EST - Fed Gov. Randal Quarles gives departing thoughts at AEI
11.30 AM EST - Fed Presidents Mary Daly and Tom Barkin speak on the labor market
Friday:
8.30 AM EST - Nonfarm payrolls in the U.S. Similar to the ADP employment report, the expectation here is for a growth of +581,000 jobs. This would mean an increase from last month’s 571,000 jobs created.
8.30 AM EST - U.S. Unemployment rate. The expectation here is for the unemployment rate to drop to 4.5% from 4.6%.
8.30 AM EST - Average hourly earnings for U.S. workers. Expectation here is for a 0.4% month-over-month increase. This represents an annualized rate of 4.8% - which is well below the current inflation rate of 6%+.
9.15 AM EST - St. Louis Fed President James Bullard speaks
It's a big week coming up, and as always, we'll keep you posted on any relevant news throughout the week right here and from our Twitter account.
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