The rapidly increasing value of BTC is largely associated with the recent announcement of PayPal to accept BTC as currency, giving access to BTC to more than 300 million users, compared to only 100 million prior BTC users. According to Pantera Capital, this has had a major impact on BTC. Figure 4 below shows the increase in BTC purchases from itBit, the provider that PayPal uses for crypto transactions. Currently, Paypal and other providers are buying more than 100% of all newly issued bitcoins, creating additional demand with it. As highlighted in the figure below, the volume of transaction is shown, which remained stable during the year, but increased tremendously since PayPal enabled BTC transactions. Given the huge surge during the last two weeks, the demand is likely to increase even more, indicating that the current surge is not over yet. Moreover, if BTC surpasses its record high from 2017, it will cover the news even more, another indicator for an even higher price.
DeFi is probably the topic in the crypto space in 2020 and its steep rise during the summer. DeFi started with a total value locked in the area of millions in the year and is (as of November) at around $12.5bn. This development is also not expected to fade away towards the end of 2020, although it seems possible that there will be a decrease in growth compared to the summer. Figure 14 shows the DeFi ecosystem separated in sub-categories.
Macro and Political Outlook November 2020 by Macro Eagle
Should we get a Blue Wave, then the “consensus trades” are rotation from Growth into Value (on stimulus), overweight infrastructure/green-energy, short Treasuries (rising yields), short US Dollar and long selected Emerging Markets (like Mexico). The biggest risk in the short-term would be a sell-off due to fear of change in tax policy (wealthy Americans locking in “Stepped-Up Basis”, capital gains rate and/or Tax Loss Harvesting). The medium-term risk are higher US yields/curve steepening on the back of stimulus. For a quick overview of the other scenarios (already amply covered elsewhere) see short summary below. Also important to keep the portfolio on the right side of what won’t change, whatever the outcome: (1) More stimulus and hence higher yields; (2) China bashing; (3) Big Tech under political pressure and (4) the green-energy transition. The latter obviously turbo-charged if Biden comes in.
Macro and Political Outlook October 2020 by Macro Eagle
Packed calendar ahead. This week we get employment in the US, while China goes on holiday for week (mid-autumn festival). Next week we have the only VP debate, plus we will find out if Congress manages to pass another relief-package before the recess starts on Columbus Day (Oct 12th). Then, the Third Week promises fireworks with the EU Council meeting battling over the recovery fund, the EU budget and Brexit. We also get the 2nd Presidential debate, the start of Q3 Earnings and tons of economic data. After that, the Fourth Week brings us the 3rd Debate. Interestingly, on the same day, the FDA will hold a “vaccine update committee”, which makes me think that this could provide a platform for Trump to announce a tactical “huuuuge breakthrough – biggest ever”. Finally, the Fifth Week will feature the ECB (strategy review, PEPP, maybe AIT) while everybody else is counting the days to Election Day the week after. With the al-fresco days of summer now officially over, the start of the “normal” Northern flu season is upon us, so before we talk about the US election, let us quickly turn to Covid.
September PREVIEW by Macro Eagle
Famously, September is the cruellest month for equity markets, with the Dow down 41/70 times since 1950. Apart from the ongoing issues mentioned above the key events in the month ahead are: Treasury issuance and unemployment figures this week. ECB and Russian regional elections next week. New Japanese PM, TikTok deadline and FOMC during the 3rd week. Italian election during the fourth week. And the first US presidential debate in the last week. All while capital markets get hit by an avalanche of IPOs (Airbnb, Ant Financial, DoorDash, etc.). And don’t forget NATURE. In August we got fires and blackouts in California, hurricanes hitting the Gulf (Laura and Marco), the last ice shelf in Canada’s Artic breaking up and China/North Korea being hit by floods. But it is September when the hurricane season normally peaks.