The Trader Top 9: What Happens When Markets Get Sick?

Welcome to the inaugural edition of the Trader Top 9, a new newsletter from Cove Markets.

The Theme of the Week

Fears of disruption from the Coronavirus are finally catching up to markets - both traditional and crypto - with implications in both numbers and narratives. Without further ado, our countdown.

The Trader Top 9

9. Before we get into the craziness, let’s look back to the simpler times of last weekend, when we just wanted to chat about a huge new blockchain and crypto report from JPMorgan…

The team a @jpmorgan released a monster 74-page cryptocurrency report a few days ago.

Too long?

Here's a thread summarizing the best parts 👇 pic.twitter.com/Bn6mbIzvKe

— Matt Dibb (@mjdibb) February 26, 2020

8. …or discuss key issues surrounding exchanges like fees

//THREAD

Let's talk fees.

One of the common phrases on CT is that "fees kill your gains"

Most humans are visual learners and the ones who aren't usually need some sort of proof to back up a statement for them to believe it. Normally no data is presented.

Time to change that pic.twitter.com/hRMHCIp5nf

— Cosmonaut (@CosmonautC) February 15, 2020

7. …or celebrate news that derivatives exchange FTX was thriving and raising a huge round

New show with @SBF_Alameda just dropped!

Whenever I speak with a team doing billions in volume and launching products like TRUMP coin...it's an epic convo.

We also talk $BTC bull, Bitfinex maintenance, and being in HK during Corona outbreak.

Watch here: https://t.co/hrNstNjf4U pic.twitter.com/2lhIl7Wv4n

— Luke Martin (@VentureCoinist) February 20, 2020

6. …or even look at the wide and rampant dismissal of Warren Buffett’s critiques of the crypto industry following a (very expensive) meal with Tron’s Justin Sun

Warren Buffet has a habit of missing the biggest investment opportunities of a life time.

❌ Google
❌ Amazon
❌ Uber
❌ Apple (bought some last year)
❌ #Bitcoin

He also has significant investments in major banks, the direct competitor of Bitcoin. pic.twitter.com/O41h0VVO0e

— Jacob Canfield (@JacobCanfield) February 24, 2020

5. But no, in a week that is destined to be all about volatility and grappling with crypto in the context of larger markets, let’s start the real countdown with a big picture thread from Ikigai’s head of research Hans Hauge:

Welcome to the Fourth Turning. At this time, we have entered the "crisis stage" as defined by the generational shift currently in progress. Boomers are retiring, handing the reins to Gen-X, and Millennials are entering their wage-earning years. Let's look at some data.

— Hans HODL (@hansthered) February 22, 2020

4. Of course, the notable and dominant feature of the week was a major market selloff as Coronavirus fears finally came home to roost.

This drop wasn't caused by excessive leverage, the fed, interest rates, or valuations.

It was a virus.

Good reminder that risk is what you never see coming.

— Michael Batnick (@michaelbatnick) February 25, 2020

Although there was *some* disagreement about causality:

Most sell offs have little to do with news. Bernie’s rise & the virus were both known beforehand & became bigger risks over the weekend. This was worth a percent or two. Outsized sell offs however are almost always due to systematic players interacting (CTAs, delta hedging, etc) https://t.co/irGwVhq3gU

— THE LONG VIEW ⚫️ (@HayekAndKeynes) February 26, 2020

3. In the crypto world, the question was about how markets were going to respond. At first, bitcoin seemed to hold its own as stocks tanked.

Bitcoin is seemingly not reacting to the coronavirus and market shakeup. Gold is ripping, equities are dumping. The bitcoin market never closes - it should have reacted already if it was a flight to safety. That said, it’s still a massive benefit if it remains uncorrelated.

— The Wolf Of All Streets (@scottmelker) February 24, 2020

But...that didn’t last long

Bitcoin is currently dumping alongside legacy markets.

— The Wolf Of All Streets (@scottmelker) February 25, 2020

2. Some poked (reasonable) fun at the narrative flip flopping

Did everybody who called bitcoin a safe haven asset flipped already and is now calling it a risk-on asset?

Asking for a friend. He's writing a paper on pancakes.

— Alex Krüger (@krugermacro) February 25, 2020

Others had interesting takes on what makes BTC so different

“#Bitcoin trades 2/3s like a #tech stock and 1/3 like digital #gold.” @JanvanEck3 told me this a few years ago. This is an insightful observation that I found true, especially during big market sell-off days when Bitcoin moves more with tech stocks then the gold-safe-haven trade. pic.twitter.com/NAxaFv7m7u

— Gabor Gurbacs (@gaborgurbacs) February 24, 2020

1. Yet where the narrative landed for most was a return to the idea of BTC as an uncorrelated asset, rather than as some sort of safe haven.

“Everybody should have 1% of their assets in Bitcoin specifically.

When you see the amt of leverage the financial industry is running, there is a lot of risk to the downside. Now, an average individual citizen of every country in the world has an uncorrelated hedge.”@chamath pic.twitter.com/vlSIJaaJS2

— Yassine Elmandjra (@yassineARK) February 26, 2020