Here are some stuff you should check out this week.
Nick
Pumping the market
So… what’s going on with the stock market these days? The SP500 dropped in March. Then pumped thanks to the Fed plunge protection team.
Since the beginning of June the stock market stopped its rally and is showing some signs of weakness… just as the Fed is taking a break in its balance sheet expansion.
Coincidence? Yes and no.
There are two aspects in every Fed intervention.
One aspect is actual money printing, in that case about US$ 3 Trillion. Thanks to the Cantillon effect that’s buying them financial assets inflation.
The other aspect is manipulating the market’s psychology. The FOMC isn’t all powerful in influencing the market. That’s why you need Jay Powell to go on 60 Minutes to “send signals“. That way other market participants can do the job of front running the Fed thus pushing the market higher.
Now the Fed balance sheet has reached a plateau in June. That’s mostly due to the end of the currency swap programs with other central banks.
That has a two consequences.
One is that there is actually less money being pumped in the system. The other is that the market expects the Fed to do more.
So there is a self-fulfilling prophecy. If the stock market lose momentum or starts to tank, the Fed has to pump. Brace for it.
Running with the bulls
Here is a tweet from Willy Woo predicting a Bitcoin exponential bull run soon (TM):
I’m not going to comment on the model and the validity of the prediction. Nope. Instead I’d like to suggest another model. Maybe call it a “meta—twitter-model”.
Here is the idea. Take a popular tweet predicting a bull run using some model. Then do a sentiment analysis of all the replies. My guess is that the more negative the aggregated sentiment is the closer we’d be to the next exponential bull run.
Who knows, this “meta-twitter-model” might be even more accurate than the models in the original tweets.
Someone should do that:
Collect popular tweets (lots of replies) from the past predicting a Bitcoin bull run.
Run a sentiment analysis on the replies to get an aggregate sentiment score for each tweet.
Plot those in parallel of the Bitcoin price (using tweet publication date).
See if this is a leading indicator.
If someone has already done that please let me know. Otherwise I’m going to do it myself.
Inflow multiplier
Here is an interesting piece of research from Messari. Say Bitcoin receives some inflow from institutional investors, what effect would this have on the price?
That’s interesting because money inflow does not necessarily means that $1 getting in will make Bitcoin price rise by $1. So getting a range of estimates for what institutional money could do to the market is important.
Definitely worth a read.
Debunking Bitcoin myths (institutional edition)
In this day and age where Goldman Sachs can’t get a coherent story about Bitcoin here is the research piece you need: https://ark-invest.com/analyst-research/bitcoin-myths/.
Yassine Elmandjra from Ark Invest is taking on the five most enduring myths about Bitcoin. Keep the link at hand and spread it to the misinformed investors around you.
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