Nov 9 • 8M

Crypto’s Red Tsunami

Bitcoin and other digital currencies are continuing their descent from the FTX drama…

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The daily podcast discusses the major market activity and economic data release schedule for the day ahead, with a contrarian bent. Also includes regular podcast episodes a day (or more) early and without ads or announcements.

Good morning contrarians! It is Wednesday, Nov. 9. Join today’s discussion on the substack app and discuss the crypto death watch here.

Stocks advanced yesterday but the big story was in cryptos, which suffered a major meltdown after the exchange FTX reported a liquidity crunch and eventually agreed to a deal with Binance. Bitcoin dropped by double digit percent and briefly fell to a new 52-week low. It was ugly and leaves the crypto world shrouded in even more questions.

State of Play

The ‘red tsunami’ that was expected in US politics has mostly failed to materialize. Republicans look to have regained control of the House but the Senate is still in play. The red tsunami is definitely materializing in cryptos however. As of 0615:

  • Cryptos are continuing to take on water, with Bitcoin down another 10% to trade around $17,700, near a fresh 52-week low. Ethereum is down close to 20%;

  • Stock futures seem to be taking the news in stride, with major indexes all down less than 1%;

  • Commodities are pretty quiet as well but WTI crude oil is lower than it was yesterday, trading around $88/barrel;

  • Not much doing in bonds either. Yields basically unchanged: the 2-year at 4.67%, 10-year at 4.14%.

Earnings

It’s a busy day for earnings. Another one. WEN 0.00 , RBLX 0.00, DHI 0.00, HBI 0.00, RCI 0.00, and TTD 0.00 are among the highlights before the open at 0930. After the close at 1600 we’ll hear from RIVN 0.00, WYNN 0.00, and CELH 0.00.

The Bottom Line©

Plenty of Schadenfreude (German word you should be familiar with) to go around over the crypto meltdown. This has been a long time coming and some of these crypto bros have been so obnoxious on the way up (and continue to be annoying AF with their denial) that you can’t help but root for the entire industry to collapse in a giant mushroom cloud.

That’s all fine and good, but there could (and likely will) be second-order effects that transcend the goofy world of cryptos. That’s the concern, that this could lead to a liquidity event in other asset classes. So far stocks are holding up fine. But it’s early days as they say. You figure somebody somewhere is going to take a massive markdown on their crypto portfolio that will require selling in other assets. Moves like this are very rarely contained. So watch this space.

Where the political drama is concerned, it doesn’t look like investors are giving this very much heed. Probably the calculation is that Republican control of the House is still a check on any ambitious agendas emerging from the executive branch. Even if the Senate remains democratic we can be assured of gridlock, which presumably is good for markets. Though again: the Fed stuff is probably the bigger concern. We’ll deal with that again tomorrow when we get a fresh CPI reading.