Invictus Capital: Weekly Wrap 04.06

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Market News

While June has gotten off to a relatively quiet start as the market continues to search for a clear direction, it doesn’t take much to find hints that the institution-driven bull market may be far from over. As an example, JPMorgan is hiring for 71 blockchain-related positions, with knowledge and experience with Bitcoin and Ethereum “a huge plus”. Bitcoin broke out of the narrow band in which it had been trading (34–38k) on Thursday, only for a barrage of tweets from Musk around his apparent breakup with the cryptocurrency leading to its subsequent drop on Friday. Bitcoin is now trading below its 20-day moving average, removing some of its weekly gains. Despite this, Bitcoin is on course for one of its best weeks in about a month. Ethereum has not been spared either, falling further than Bitcoin over the past 24 hours. Prior to this selloff, it was on course for another weekly gain of more than 10%. Dogecoin has managed to outperform the broader market following Coinbase’s announcement that it will make the Musk and meme-inspired cryptocurrency available to its users.

Traditional markets experienced a relatively calm week with holidays on Monday in the UK and US, with much of the remainder spent waiting for a deluge of data readings to be released for clues as to the future path of central bank policy. One story that bucked the trend was the still-unfolding AMC Entertainment situation, with the stock being driven to record highs by exuberance from members of Reddit’s Wall Street Bets. The stock is currently up around 400% from where it began in 2020 — but this abstracts from the mountain of additional shares issued by the company since then; the market cap is up in the range of an astronomical 2500%! This week’s stock issuance went directly to hedge fund Mudrick Capital, who made a quick buck by swiftly dumping their holdings onto the frenzied retail market.

Over the week, global equity markets were mostly flat, with positive data readings from Europe (with manufacturing activity and employment beating estimates) and the US (strong readings for services sector activity) keeping the inflationary growth narrative afloat. However, markets were unable to use these data readings as an excuse to rally, as it implies a greater likelihood of the US Fed tapering quantitative easing too early for the market’s liking — and this point was proven by the Fed’s Patrick Harker claiming that it might be time to start thinking about tapering. This comes after statements earlier in the year from Chairman Powell that the Fed was “not even thinking about, thinking about tapering”. Harker’s comments saw US bond yields spike along with the dollar on Thursday, with gold dipping in a textbook market move.

However, at the time of writing, Thursday’s moves had all but been erased in the wake of a mildly disappointing US jobs report that saw crypto prices rebound firmly along with gold on the back of dipping US bond yields; with markets positioning for the Fed to keep the pedal to the metal.

Indicators (28 May — 04 June)

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