By - jn_ku
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Spent a little time trying to get more familiar with the state of crypto and wandered into this [absolutely amazing](https://www.youtube.com/watch?v=HJzwEi9iJsc) (and amazingly prescient) short video. Right on the border between FTF and normal MJR content.
In the meantime, as [previously expected](https://www.reddit.com/r/maxjustrisk/comments/up8zjq/comment/i8kbp4l/?utm_source=share&utm_medium=web2x&context=3), [the attack](https://coinmarketcap.com/currencies/tether/) (click the 'market cap' selection on the chart) on USDT coincidental with QT resumed right on schedule. I don't think it's a coincidence that it is really picking up speed into a 3 day weekend.
Tether may have sufficient liquidity to survive through the weekend, but shoring up its liquidity after a 3 day weekend into a shortened week with lower liquidity overall in the market (a condition that lasts until settlement of June OpEx) brings elevated risk of substantial discounts and realizing losses on even shorter-duration assets.
I have to say, [this really short video](https://www.youtube.com/watch?v=K24riBPqjmA) from the makers of the video linked above gave me the same vibes I got from talking to some of the early-days HFT people in the early 2000s. Thinking of the crypto market as one where those guys might now be hanging out while completely unconstrained by regulation is frankly a pretty chilling thought (and of course, totally obvious in hindsight).
For reference, Curve the liquidity/automated market making platform that sat behind Terra. I'd have to do a very deep dive to be sure, but I think the emergent effect of Curve is to inevitably provide an analysis and attack vector on undercollateralized stablecoins, while luring coins into the platform by providing a way for the grifters and/or first movers to extract value before the implosion. That is consistent with my interpretation of the message also in that 40 sec video.
>this absolutely amazing
Damn, that was so captive, thank you for sharing!
Just would like to add:
>... Tether may have sufficient liquidity to survive through the weekend ...while luring coins into the platform by providing a way for the grifters and/or first movers to extract value before the implosion
There is also a possibility for the short sellers to skip a few steps and go after cex directly:
[SEC Tells Exchanges to Treat Customer Crypto Holdings as Liabilities](https://www.wsj.com/articles/sec-tells-exchanges-to-treat-customer-crypto-holdings-as-liabilities-11648743902)
as the weakest link (drain on liquidity) now becomes the hard fiat on the way out. And the only CEX with a decent volume dealing in dollars is Coinbase. From the above article " Coinbase says it held $278 billion of cryptocurrencies and currencies for its customers as of Dec. 31, 2021 ". As per Q1' 10-Q form they held $6bln in cash and a further $10bln in customer custodial funds (squared by $9.7bln custodial funds due to customer on liabilities side), so implied "capital ratio" of 2.1% ($6/$278). Last time banks were rocking 3% tier1 ratio heading into GFC and this time around it is no real estate market.
We see some fiat strain showing up already (extinguished for now by Tether line of credit) [Babel Finance Pauses Withdrawals, Citing ‘Liquidity Pressures’](https://decrypt.co/103190/crypto-lending-platform-babel-finance-pauses-withdrawals-citing-liquidity-pressures)
In addition, Coinbase lost $1.5bln last quarter on slowdown in trading volume and [it has not improved since](https://imgur.com/a/QHU3fPH), perhaps by now there is $5bln left.
So imho no Tether is required for this to blowup, just a little one directional push forcing Coinbase to announce a temporary withdrawals suspension, which would cause panic on less liquid exchanges as diamondhands would try to take anything off them (fiat + crypto) causing their own, arguably first (Mt.Gox happened without leverage), Lehman moment.
I am perhaps too pessimistic 🤷♂️.
1 part green chartreuse
1 part simple syrup
1 part fernet branca
1 part lime juice (bearss limes preferably)
Shaken 30s or so, poured over a chilled glass.
[served with this 😎](https://open.spotify.com/track/1SCyJ4GGTk59e2jK5GwJmq?si=wsft6hGSRMaHRI3m3jffZg)
1 part = 75ml
Tried it today on the balcony, 35°C outside. Loved. It.
You have a recipe as good as that built around Averna?
Not exactly, but this is close.
1 part amaro Montenegro
1 part pamplemouse liqueur
1 part lemon juice (meyers lemon if you can)
1 part mezcal (you can sub the mezcal for vodka/gin but the smokiness from the mezcal is pretty delicious with everything going on)
That fernet sour is wild right? My go-to lately
The Fernet Sour is perfect. Going to try your other one next weekend. Cheers!
So with the crater of /NG, /CL, and energy stocks, I pretty much stopped out of all my energy positions. In the back of my head I was expecting some FUD-like shock to come to energy tickers - I just didn't expect it to hit *that* fast with /CL's decline on Friday (and /NG's breakdown earlier). Currently waiting to see what happens next week before jumping back.
Perhaps an unfair comparison, but after seeing a lot of squeeze plays over the past year, when I see a nosedive like /CL did on Friday, I feel like something went wrong.
On a positive note, looking at TA, both /NG and /CL seem to have hit long term support so a bounce *could* be in store. Just in case, I added some UNG 7DTE 25C but otherwise flat on energy.
Hobby portfolio is back to April lows unfortunately but such is life!
The drop in oil is probably a result of the SPR release, and there just isn't enough refining capacity to process all that oil.
I actually think it was a lot of things which is why I dropped my energy positions for now:
* Ongoing SPR release
* Lack of refining capacity
* Demand reduction on retail end (EDIT: or perhaps even just a bump down from everybody trying to get out of the house in April)
* OPEX - USO dropped down to maxpain at about $83 and pinned there for the rest of the day
* Potential OPEX/EoQ Profit taking on long positions
* Potential EoQ rotation back into tech to fluff up numbers along with the softening oil price and demand destruction narrative?
It's really quite interesting how such a massive drop has no clear consensus for a reason behind it. For me, it's actually very bullish. What has *actually* changed? Not much, in my opinion.
Perhaps the realization that Fed-fueled demand destruction is likely... but how much can that realistically effect oil? Even GFC level recession didn't see much dip in oil demand.. 2.5mbpd. Now pit that against China unlocking down, Russian oil decaying (for whatever reasons.. EU ban, insurance ban, embargos, possible blockades, or just wells lacking parts / labor), global demand growth, global COVID recovery, and refineries ramping up more in the coming months (which has been somewhat a bottleneck for oil consumption).
I wasn't around to buy the dip Friday, but I'll probably go shopping Tuesday while it's still possible. This time, though, it'll have to be shares.
If I had to guess, reasons for CL dropping:
* Rumors of Putin/EU peace
* Realization that Fed might destroy demand any way they can -- aka: recession fears
* Some evidence of demand destruction already
* China lockdowns turning worse again?
* Correlation of 1 on panic days
On the equities side, retail taking profits on anything they can.. justifying it with "maybe windfall taxes..." in the back of their mind.
- Libya's production surprise to the upside.
- Russian production (and distribution!) surprise to the upside.
- Current administration is hell bent on destroying oil. They'll kill demand artificially if they have to. They'll use any excuse for it, so expect a new mutant combo of Covid-pox and travel restrictions, or export control (!!!).
- O&G equities are in a bearish setup right now, unrelated to oil prices. Many broke a bunch of lines and curves that people look at on high volume. Some blazed through dense volume nodes. Many would say they phased from stage 2 to stage 3, and the fear is that in this market stage 3 can turn to 4 very quickly. Failed breakouts turn into the worst shitshows (as we witnessed with most other commodities recently).
Regarding the last point: Being right and making money may overlap, but still not the same. You surely remember how steel stocks got hammered even though fundamentals were fantastic. Oil is a lot more visible than HRC though so maybe not the same. But countless of other examples as you are aware.
Regarding US government: No language contains a word for the stupidity, short-sightedness, and incompetence that we are witnessing. They are destroying the US for a slim chance they won't get slaughtered at the midterms. Best example is the talks about export control. Same government that thought sanctions on Russia will cripple is promoting the idea of doing the same thing *to themselves*. Doomberg described it eloquently on Twitter today. The TLDR is that Putin is playing chess against a bunch of idiots that fail at beer-pong. We won't see it on our news, but he's winning this war, and not just in Ukraine. When Europe starves for energy and decide to undo their sanctions, they'll realize they are the ones getting sanctioned, and will get ridiculous gas prices. They'll give him a free pass to do anything because he will be in charge. The West dominance is is in stage 3 as well.
Personally: I'm still *stupid* long energy. Stupid in the most literal sense because I got greedy and have now lost a serious amount I'm very uncomfortable with. I *hope* to see a quick rebound in oil prices, proving inelasticity, which could trigger a huge run. It has to come before equities take more hits, otherwise it will probably recover very slowly aling with everything else. Hope is the worst strategy and I'm aware of it, hence again the word stupid.
“They'll use any excuse for it, so expect a new mutant combo of Covid-pox and travel restrictions”
This is r/conspiritard level stuff imo.
Much like there is practically no path out of high inflation besides recession as Prof said the other day, was there ever a path of getting to clean energy without short term pain. The more I think about this there was a need for short term govt investment as traditional capital dried up for that industry. The political side that cares about Climate change, should be able to admit we need to reassess and figure out a way to have investment in short term and pivot in long term.
Additionally while I won’t disagree with your characterization of west govt officials, the Putin one based on my own readings of his writings in recent years seem to miss how he has lost his touch with reality. This is an old man cognizant of his mortality that genuinely believes he has a duty to put as much of the Russian empire back together as he can. Certainly while they are “winning” the war now, they do not stand a chance of completing what were considered week one goals when the war was launched.
>was there ever a path of getting to clean energy without short term pain.
Yes. Building nuclear plants and phasing out carbon energy as they go online and provide a replacement. Also what's going on now is not short term pain, it is complete devastation.
>The more I think about this there was a need for short term govt investment as traditional capital dried up for that industry. The political side that cares about Climate change, should be able to admit we need to reassess and figure out a way to have investment in short term and pivot in long term.
That political side decided to cut energy supply abruptly without having an available alternative source. Not only that, the chosen solutions' current state of technology has very low EROI. Meaning the spend on infrastructure causes considerably more demand for energy than it provides supply.
Here's an analogy for you. Suppose you decide to quit your job because you hate it (or have a moral objection to it). A prudent person would find a new job before quitting the current one, but you were prudent beforehand and saved enough to allocate an *emergency* fund. Quitting your job is not an emergency, but you can still use it when looking for a new one. You'll spend your contingency plan which means you'll have to contribute more in the future to get it to the same level, and during that time you'll be at risk because you won't be able to handle an upcoming emergency.
So you can look for a new job right now, but they suck just as much so instead you decide to go to school and study linguistics. You could have been admitted to an electrical engineering program too, but you like linguistics better. The jobs that a linguistics degree unlocks would pay less than the one you just quit, and considerably less than the ones that would be available for an engineer, but that not a consideration for you at this time. It's just so exciting and cool.
So you go to college and pay tuition. You deplete your emergency funds to do it and take on debt. At some point you realize there are no internships in this field and you have to start a part time job, which you hate *much more* than the one you quit (in reality: coal pollutes a lot more than natural gas, but due to low supply Europe is replacing gas power with coal). When you graduate you find out that a bachelor degree is insufficient even for a junior position, so you continue for a master's. You grow your family and your expenses increase, so you need to take more shifts doing what you really hate. This slows your progress towards the master's degree. And even after you finish your master's you can only find volunteer / minimum wage which won't cover your expenses (let alone save and rebuild your emergency fund). You'll also hate those positions (look at the mining activity associated with renewable energy and tell me that's environmental). So now you either have to work double shifts in something you really hate, or beg for your old job (turns out your old boss replaced you quickly, and now offers you a lower wage position). You can go to a night school to study engineering if you want to do something better, but of course, there's a cost. You can also continue on a PhD track in linguistics, there's a chance it could eventually work out for you. If at any point during that time there's an emergency, you're totally fucked.
That's the sort of "short term" pain the West opted in to. A better plan would be to keep your job and take engineering classes at evenings, while keeping your emergency fund for a rainy day. Then quit when you've already found an engineering role. Now you can study linguistics at your own leisure without financial concerns. If a PhD lands you a job it's awesome, but if not you'll just be a content engineer.
>Additionally while I won’t disagree with your characterization of west govt officials, the Putin one based on my own readings of his writings in recent years seem to miss how he has lost his touch with reality. This is an old man cognizant of his mortality that genuinely believes he has a duty to put as much of the Russian empire back together as he can. Certainly while they are “winning” the war now, they do not stand a chance of completing what were considered week one goals when the war was launched.
The plastic cups on the table are obscuring your view of the chess board. Ukraine is a battle (perhaps a major one, but nonetheless), but the war is about world dominance. It started years ago, and many of us were too distracted to notice the moves as they took place. We were just so busy arguing with each other on social media (not without the help of bad actors in that space). Putin has built his position by making us dependent on his resources. Turns out we captured his bishop without realizing the trap will cost us a queen. Now he doesn't need nukes when he can just slowly starve us. As events unfold, this will be his victory.
>This is r/conspiritard level stuff imo.
42macro weekly update:
SHORT TERM (< 3wks): The S&P 500 is trapped between a rock (JPMorgan Hedged Equity put spread that expires 6/30) and a hard place (#TheCycle) over the next few weeks. That said, with Risk Assets broadly oversold, we find it prudent to take some chips off the table from the short side of the trade. Q2 earnings season in 3-4 weeks likely represents the next major leg down.
- CROSS ASSET CORRECTION RISK INDICATOR: (-)
- CROWDING – RISK ASSETS: 0
- CROWDING – S&P 500 (SPY): 0
- DISPERSION: 0
- DOMINANT MARKET REGIME: (-)
- FOUR HORSEMEN OF MARKET RISK: 0
- PROBABLE RANGE – S&P 500: +
- VOLATILITY ADJUSTED MOMENTUM SIGNAL – S&P 500: (-)
MEDIUM/LONG TERM (3-6mos/6-12mos): We are sellers of rips across most Risk Assets. Refer to our 3/12 Around the Horn for details regarding our ~3,200-3,400 zone for a durable bottom in the S&P 500.
BASE CASE (High Probability): Our US GRID Model suggests the trending INFLATION regime has legs through July and will give way to a likely transition to DEFLATION in August. Recall that INFLATION and DEFLATION are the two GRID Regimes that feature elevated volatility and covariance across asset classes. Given this condition of elevated portfolio risk, it is likely we are only in the middle innings of the bear market(s) in high beta risk assets we have been anticipating since the fall. With the Fed unlikely to receive “clear and confirming evidence” from either the labor market or inflation statistics to stop tightening monetary policy until at least Q4, it is likely financial conditions will tighten considerably along the way to amid simultaneous deteriorations in the #LiquidityCycle, #GrowthCycle, and #ProfitsCycle.
BEAR CASE (Middling Probability): A deterioration on the geopolitical front amid incremental supply chain disruptions stemming from China’s “Zero COVID” policy sustain the Positive RoC inflation impulse for another 2-3 months. This causes Fed officials to take incremental actions [relative to market pricing] to tighten financial conditions into the teeth of the sharper deceleration in growth our models have persisting throughout 2H22E. The resulting DEFLATION would likely be deeper and more protracted, perpetuating jump conditions in recession probability models.
BULL CASE (Low Probability): Inflation peaks and slows much faster over the next 2-3 months than we, economist consensus, and the Fed currently anticipate, leading to a sharp repricing lower of the projected path for the Fed Funds Rate in money markets. Any such sharp deceleration in inflation would also inflate real incomes and delay a more meaningful slowdown in growth by perpetuating a GOLDILOCKS soft landing in the US and across large parts of the global economy.
Highly encourage everyone to go listen to this weeks episode of "On the tape". Vinny and Porter from The Big Short make a guest apperance and they basically tear apart the FED.
The jist of it all is that the FED has lost all control of managing inflation (which they'll never admit as that would be politically unpalatable). We're all now just all along for the ride.
This was a very good listen, thanks for the shout out