Now it’s not just crypto companies that are in crisis.
These days tech giants have been in trouble too and that’s bad news for both stocks and crypto. It’s bad news for stocks because tech companies make up a substantial chunk of benchmark investment indices like the s&p 500 so if they perform poorly they’re likely to drag down the rest of the stock market too. Similarly the crypto market is highly correlated to tech stocks specifically the nasdaq 100. It should come as no surprise then that the nasdaq also saw a nice recovery late last week just like the crypto market recovery. However the recovery in tech stocks is unlikely to last for long.
Although tech giants like apple and amazon are still doing all right. Last week google announced that it won’t be hiring as many people going forward due to the quote uncertain economic outlook and microsoft went as far as to announce that it would be laying off quote less than one percent of its workforce. As reported by the guardian netflix, meta google, twitter and tesla will all be releasing their q2 earnings over the coming weeks and the cracks forming at google and microsoft suggest that these earnings will come in below investor expectations. Case in point meta ceo mark zuckerberg recently stated that quote “this might be one of the worst downturns that we’ve seen in recent history and that the company would be hiring 30 fewer software engineers as a result”. Now to be fair, this news from meta isn’t all that surprising.
Given that the idea of a centralized metaverse owned and operated by a company that’s known for censorship isn’t all that appealing to anyone with half a brain. Even so it’s clearly a sign of a bigger trend that’s only just beginning and with most tech companies having profit to earnings ratios that remain astronomically high. It’s likely that we will see many of their stocks slide in the second half of the year. This is once again consistent with the projection that the crypto market will see its bottom sometime in the autumn and it could mean that the bottom for crypto will be even more brutal than many investors are expecting. The caveat is that big tech companies and other market movers in the sp 500 still have record levels of cash in their reserves.
According to the wall street journal the largest US companies still have a whopping 8. 3 trillion dollars in cash or cash equivalents. Thanks to the federal reserve’s money printing. Many analysts believe this could give companies enough runway to survive the recession when it inevitably comes. Assuming we’re not in one already who knows maybe some of this massive money pile will find its way into crypto because of all the inflation going on.
This brings me back to the elephant in the room which is of course inflation. Last week the cpi for June was released and it came in at a staggering 9. 1 percent significantly higher than the 8. 8 percent investors were expecting. As you might have guessed this is what caused that sharp dip in the markets on Wednesday and it seems the only reason the markets recovered was because consumer sentiment is somehow on the rise according to the university of Michigan.
As you can see however this apparent recovery is barely visible on the long-term consumer sentiment. Index it rose to 51. 1 from 50 in june which was actually the lowest level consumer sentiment had ever been since the index was created. This is not all that surprising given that consumers are being financially crushed on all fronts and costs only continue to rise. I reckon the only reason why we saw this small recovery is because people are happy to be out and about after being locked down for two years.
That said another contributing factor to the market recovery was something that almost everyone overlooked and that’s the 900 billion dollar military spending package that was passed by the us house of representatives on Thursday. As with many massive bills the military spending package contains a few critical clauses such as a 4. 6 pay rise for us military personnel and an official raising of the minimum wage for public workers to 15 an hour. The harsh reality is however that these two clauses are likely to contribute to inflation since more money chasing the same amount of goods means prices go up. This just goes to show you that the monetary policy of central banks is just a part of the inflation equation.
The fiscal policy of governments plays a role as well and some have argued that it plays an even bigger role than monetary policy. At the same time you have all the supply side pressures that can’t be solved by governments or central banks. This is why i think inflation is likely to continue for the foreseeable future and why i’ll be doing a text about how to keep up with and even beat inflation sometime next week. In the interim you can check out my recent texts about all the unprecedented disruptions to food processing facilities using the link in the description. Now i know we looked at bitcoin’s charts earlier but i wanted to bring your attention to the wyckoff pattern that appears to be forming on btc’s daily price chart.
If you read our article about the wyckoff method you’ll know that it’s basically used by institutions to trick retail investors into buying and selling at the worst possible time the wyckoff method we seem to be seeing. Now is accumulation and if so we could see one more sharp drop to the 18k level before snapping higher as per the spring. If this does happen i bet it will be around the fed’s meeting and the release of the gdp figures for q2 this year so just keep that in mind. Last week’s top performing cryptos were lido finance’s ldo token, polygons matic token, r weaves ar coin, ethereum classics, etc coin, and quant network’s qnt token. As i mentioned earlier lido finance’s ldo token is rallying on the news that ethereum developers have set a tentative date for the merge ldo’s long-term price history suggests.
It’s likely to see lots of resistance around these levels but if it can break higher the next stop will be 2. 50 to 3. Close to a 2x gain at the time of shooting. Next we have polygons matic token which is rallying on the news that the project had been selected to participate in disney’s accelerator program. Polygon is also ethereum’s leading scaling solution so matic likely got some extra momentum from the tentative merge date.
Like ldo matic faces a lot of resistance around these levels but could rise as high as a dollar if it can break through the 80 cent barrier full disclosure. I hold matic as part of my personal portfolio and you can find out what else i hold by signing up to my newsletter in the description below. As for arweave its ar coin appears to be rallying on the news that the project had partnered with one of the front ends. For arvei’s decentralized social media platform lens protocol more about ave in the description. Like ldo and matic ar has a lot of resistance around the 15 level with some luck it’ll manage to reclaim the 25 mark in the coming weeks where the next level of resistance awaits.
When it comes to ethereum classics etc coin this is also something i covered earlier. Etc is rallying because many investors believe it will stand to benefit when ethereum transitions to proof of stake. I rather wonder just how much etc could rally though because the ethereum classic twitter account hasn’t posted anything since late april. This leads me to believe that what we’re seeing now has less to do with fundamentals and more to do with speculation. Last but not least we have quant network’s qnt token and i honestly couldn’t identify the origin of its most recent pump.
My best guess is the news that 1900 people had signed up for the crypto projects course about its over ledger protocol at king’s college here in london. Qnt is actually looking quite strong on the daily and if we see another bull flag play out it could rally as high as 120 dollars in the coming weeks. .
