Connecting the Dots
Episode 117 - The Changing World Order
Welcome to the new subscribers that have joined us over the last week. The aim of this newsletter is to help you navigate the world of crypto. There’s an incredible amount of information out there so we try to distil it into the things you MUST know each week, covering both macro and crypto.
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Onto the newsletter. Here’s what you’re getting this week:
Macro Update: Our latest view on the macro and its impact on crypto markets.
Crypto Native News: WisdomTree expands its institutional investment platform. Coinbase Derivatives to launch XRP futures, Standard Chartered Head of Research says AVAX price could 10x by 2029.
Institutional Corner: DTCC introduces a platform for tokenised real-time collateral management, Fidelity to offer crypto exposure in retirement accounts, Kyrgyzstan to work with CZ to develop a cryptocurrency and blockchain technology ecosystem.
Charts of the Week: Top 5 revenue generating apps, altcoin trading volumes increased.
Top Jobs in Crypto: Featuring CoinMarketCap, Revolut, Keyrock, CF Benchmarks and Galaxy.
Macro Update
This is where we connect the dots between macro and crypto.
The Changing World Order
Well, that escalated!
Trump’s “Liberation Day” caused turmoil in global stock markets this week as the much larger than expected tariffs drove fears that this will trigger a global recession and accentuate stagflation in the US.
The S&P 500 closed its worst weekly performance in 5 years, down 9% with the Nasdaq posting similar declines. Global bond yields fell sharply as growth expectations revised lower, with 10yr treasuries closing at 4% having touched yields lows at 3.86% whilst 2yr yields closed at 3.64%, after hitting lows of 3.46%. These are some giant moves and swings for the markets “safe haven” and underscore the market fear and uncertainty that this global trade war has unleashed.
Such a VAR shock naturally sparked a global de-risking. Much risk had already been “grossed down” throughout the weak Q1, so this reaction could have been a lot worse. Even the safety of gold lost its shine, falling 3% post the announcements, presumably needing to be sold to make margin calls on falling equity portfolios.
We also had some big data releases, but these seem of little importance given the forward looking implications of Trump tariffs and a retaliatory trade war. However, the data flow continued to support our thesis of a slowing, not collapsing US economy. Manufacturing ISM slipped back into contraction territory, but the more important ISM services remained just in expansion territory at 50.8%, declining from February’s 53.5% reading. Non farm payrolls meanwhile surged to 228k jobs added in March, up from Feb’s downwardly revised 117k and ahead of expectations of 130k. The unemployment rate did however tick higher to 4.2% and there was little sign of wage pressure with average hourly earnings falling to 3.8% down from 4%. In any other environment, this would have been a risk positive, goldilocks report! However, the data flow currently does little to assuage fears of the path ahead with the increased uncertainty of these extortionate tariffs.
No Fed put…for now…
Following the employment report on Friday, we also got to hear from Fed chair JPow, who, despite Trump applying pressure for the Fed to cut, refused to play ball. Instead he highlighted that the increased uncertainty, with the “significantly larger than expected tariffs” is likely to cause “higher inflation and slower growth.” Yet, the “economy is still in a good place” leaving the Fed well positioned to wait for greater clarity before adjusting monetary policy.
This lack of a clear “Fed put” sent stocks another leg lower into the weekend. We remain of the view however that the Fed will be forced to cut much more aggressively. Market pricing has moved more towards our expectations, pricing 4 to 5 cuts, but we suspect IF the tariffs are fully enacted that the negative growth impacts will see more like 5 to 7 25bp cuts.
Certainly, the bond market is screaming that the negative growth impacts far outweigh the inflationary impacts of tariffs. Market based measures of inflation have also collapsed since Wednesday, with 5yr break even inflation (market pricing for average 5 year inflation) falling from 2.61% to 2.34% and 10yr breakeven falling from 2.39% to 2.18%. The market is certainly seeing any short term inflationary impacts from tariffs as “transitory” and given JPow has explicitly said he would also look through short term tariff led price increases, but wants to see inflation expectations “anchored” in order to cut, well the market anchor is currently pulling the inflation ship lower.
Bitcoin resilience…
Notably, amidst the market mayhem, Bitcoin was the stand out performer, trading pretty much flat on the week 💪
We’ve frequently said that Bitcoin captures both the “left tail” and “right tail” of the risk distribution. In between, in more “normal” markets, correlations with broad risk remain high. At the extreme right tail, when the Fed is printing endless money and all assets are ripping higher, Bitcoin outperforms everything as the ultimate, hardest liquidity driven asset on the planet. At the far left end of the spectrum, when “risk off” is driven by markets questioning existing economic and political structures and the sustainability of the financial system, Bitcoin, as a borderless, non-sovereign asset, is the ultimate hedge against a changing world order.
Given the current global upheaval, where even the “safe haven” dollar is getting hit (given the US is at the epicentre of this upheaval) Bitcoin is starting to connect with its “safe haven” fundamental qualities. Gold eventually will re-connect in a similar vein once margin calls have been met and equity volatility calms down, but Bitcoin is rapidly becoming a more viable alternative.
A large part of our bullish thesis for Bitcoin also remains the unsustainable nature of the global, debt driven fiat economic model. As Trump attempts to re-structure global trade, the likely global slow down that implies makes the system even more vulnerable. Whilst risk understandably suffers in the knee-jerk anticipation of that adjustment, we remain however, a function of rates and liquidity.
Assets, like equities, are the collateral that underpin the debt driven financial system which powers economic growth. Ultimately, they will need to be supported and artificially inflated, otherwise the debt and economic cycle collapses. This week has raised the likely need for the Fed and other major central banks to cut rates deeper and fire the liquidity canon more powerfully than the natural macro cycle would have still required anyway. Bitcoin is perhaps starting to anticipate this.
We remain of the view that Trump is using tariffs as a negotiation tactic. However, whilst waiting for the more positive news flow, markets will remain volatile, adjusting to the likely accelerated growth slowdown. Last week’s VAR shock will necessitate a further grossing down of risk, although we feel most of this process is likely near its end given the Q1 derisking on top of last week’s selling.
Meanwhile, the weaker dollar and lower yields will reflectively start to support risk as financial conditions ease, alongside rising global liquidity. Be careful in the week ahead volatility.
Don’t take leverage, but also don’t get shaken out of Bitcoin. Short term risk will continue to impact, but the longer term, fundamental thesis for Bitcoin grows ever stronger. HODL
Native News
Key news from the crypto native space this week.
WisdomTree is expanding its institutional investment platform WisdomTree Connect beyond Ethereum to Arbitrum, Avalanche, Base and Optimism. The platform now offers 13 tokenised funds across various investment strategies such as money market, equity index, and fixed income, all registered with the SEC. Previously the platform was limited to Ethereum, but now supports Arbitrum, Avalanche, Base and Optimism. Investors can interact with the funds through U.S. dollar or Circle's USDC stablecoins, with holdings accessible in third-party and self-custodial wallets. With these additions, WisdomTree Connect now claims the offering is "the most extensive suite of tokenised real-world assets (RWA) available to institutions."
Crypto exchange Coinbase Derivatives has filed with the U.S. Commodity Futures Trading Commission (CFTC) to launch two new cryptocurrency futures products, XRP futures and XRP nano futures. Both contracts will be cash-settled and benchmarked to the MarketVector Coinbase XRP index, according to the filings submitted Thursday. The standard XRP futures contract represents 10,000 XRP, while the nano version covers 500 XRP. Both contracts are expected to start trading on or after April 21, following the self-certification filings. Read the full filing HERE.
In a recent research report, Geoff Kendrick, Global Head of Digital Asset Research at Standard Chartered Bank said that Avalanche’s AVAX token could surge to $250 by 2029 — more than 10 times its current price. Kendrick said that Avalanche’s unique approach to scaling and recent developer traction as key differentiators in an increasingly crowded field of smart contract platforms. “Avalanche’s small market cap means that incremental gains can have a big impact.” He sees the project as “right-sized for growth” and potentially the strongest contender among Ethereum-compatible chains. Analysts say Avalanche’s edge lies in how it scales. Unlike Ethereum, which depends on external layer 2 networks, Avalanche lets developers launch custom blockchains that plug directly into its mainnet. A December 2024 upgrade known as Etna removed the steep AVAX staking cost previously required to launch these chains, making the process more accessible.
Institutional Corner
Top stories from the big institutions
The Depository Trust & Clearing Corporation (DTCC), a cornerstone of global financial market infrastructure, launched a platform for tokenised real-time collateral management on Wednesday, according to a blog post. Analysts say that the so-called AppChain will be demoed at the DTCC’s upcoming "Great Collateral Experiment" on 23 April. The platform is designed to increase the mobility and velocity of global collateral movements, improve capital efficiencies and liquidity and "enable an open digital liquidity ecosystem for market participants to deploy digital applications."AppChain is built on LF Decentralized Trust’s Besu platform, an enterprise-grade, open-source Ethereum client designed to facilitate the development and deployment of blockchain solutions for businesses. Read the full blog post from DTCC HERE.
As of Wednesday, Fidelity s allowing its clients to invest in Bitcoin, Ethereum and Litecoin via individual retirement accounts. The announcement says that starting Wednesday, investors have been able to get exposure to three virtual coins, which Fidelity already offers via its crypto trading service, by opening a "crypto IRA."The firm, which is the U.S.'s largest provider of 401(k) savings accounts, will custody the assets with the new service.
The President of Kyrgyzstan stated that the National Investment Agency under his office has signed a Memorandum of Understanding with Changpeng Zhao to cooperate on the development of the cryptocurrency and blockchain technology ecosystem. The cooperation includes infrastructural and technological support, professional consulting, and the implementation of educational initiatives. The full statement says “A Memorandum of Understanding has been signed between the National Investment Agency under the President of the Kyrgyz Republic and Changpeng Zhao (CZ). In accordance with the Memorandum, the parties intend to cooperate in the development of the cryptocurrency and blockchain technology ecosystem in the Kyrgyz Republic. This includes providing infrastructural, technological support, technical expertise, and consulting services on cryptocurrencies and blockchain technologies, as well as implementing educational initiatives. The signing of the Memorandum opens new horizons for the development of digital technologies and the blockchain ecosystem in the country. This cooperation marks an important step towards strengthening technological infrastructure, implementing innovative solutions, and preparing highly qualified specialists in blockchain technologies, virtual asset management, and cybersecurity. In light of the rapid global evolution of digital technologies, such initiatives are crucial for the sustainable growth of the economy and the security of virtual assets, ultimately generating new opportunities for businesses and society as a whole.
Charts of the Week
Because charts are just as important as macro.
The top 5 revenue generating apps in March.
Total trading volume of altcoins has returned to pre-FTX bankruptcy levels, with the top 10 altcoins accounting for 64% of total volume.
Top Jobs in Crypto
Well, we all want to work in Crypto don’t we. Here’s a bit of help on your job search!
Content Moderator at CoinMarketCap
Product Marketing Manager for Crypto at Revolut
Senior Sales and BD Lead at CF Benchmarks
Trading Operations Associate at Galaxy
DISCLAIMER: The content in this newsletter is not financial advice. This newsletter is strictly educational and is not investment advice or a recommendation to buy or sell any assets or to make any financial decisions. Crypto markets are volatile, please be careful and do your own research.