Hosted by crypto analyst Marcel Pechman, Macro Markets airs every Friday on the Cointelegraph Markets & Research YouTube channel and explains complex concepts in layman’s terms, focusing on the cause and effect of traditional financial events on everyday crypto activity.
The latest Macro Markets show begins by examining why the crypto market cap is about 60% below its all-time high, while the S&P 500 is less than 15% from its peak. For Pechman, the sector suffers from a major problem because it is not suitable for a commodity or a foreign currency. Additionally, not every mutual fund can hold cryptocurrencies.
Lesson? If bitcoins (BTC) and ether (ETH) are mostly understood as alternative risk assets, so they will be traded. As a result, we should not waste time looking for theories to explain why cryptocurrencies have not been able to break new highs.
On another topic, according to Pechman, NVidia’s short sellers’ $2.3 billion in losses don’t paint the true picture. This is because the short seller can take the pain if they don’t close the loan – so if they have enough collateral, those losses are still open.
This is similar to what a buyer who paid a much higher price for their crypto experiences. Until that person sells, the losses are not specific. The difference is that the short seller has to find someone willing to lend those shares to keep the trade open.
A Bloomberg article mentioned that Nvidia is the fourth most shorted stock in the United States, behind Apple, Tesla and Microsoft. According to Pechman, the four most shorted stocks are also the top 10 components of the S&P 500, which leads to a problem: These short sellers could have been neutral in the market all along, buying index futures and selling individual stocks.
Finally, the show discusses China’s 5% growth that disappointed investors and its implications for markets. For Pechman, the most important message is China’s reluctance to issue new stimulus packages, which could be a strategy to further weaken the rest of the global economy.
A Bloomberg article shows how China is a key player in global commodities. If commodity prices and the global trade balance continue to weaken, this means lower tax revenues for other governments. Pechman points out that Germany has just entered a technical recession and the US is right behind.
Pechman believes the outcome for crypto is initially negative as it drains liquidity from markets and investors will continue to reach for short-term government bonds and cash. But if the US dollar loses strength, this is positive for cryptocurrencies in the medium term.
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