Markets Risk-On Following Signs of a Coronavirus Vaccine – Market Meditations #5

Hello Meditators

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Stay one with the markets in as little as 10 minutes in this guided meditation.

Today’s Meditations:

1. Scan the Week

2. Money Managers Take Bearish Positions in Bitcoin Futures

3. DIA announced on Friday it has raised $15 million through the sale of its governance token

4. Barstool Sports’ Dave Portnoy sells his Bitcoin, calls Link Marines ‘weak’

5. Cybersecurity firm finds hidden Monero mining malware on AWS Marketplace

6. Markets Risk-On Following Signs of a Coronavirus Vaccine

7. Apple Fires Back in Court, Says Epic Games CEO Asked for Special Treatment

8. How Will Bitcoin React to ‘Warren Buffett’ Index Latest Levels

9. How I Became a Profitable Day Trader in 1 Year

10. Growth and comfort never coexist

Crypto

Aug 28th: Smart Contract Summit

Aug 28th: Qtum: Offline Staking

Aug 29th (or earlier): Serum Beta Launch

Aug 31th: JST Yield Farming Release

Global

Aug 27th and Aug 28th: Annual Economic Symposium in Jackson Hole 

This is a light week for data, however, we have the annual Jackson Hole meeting which will take place over the course of Thursday and Friday: August 27th and August 28th. The event will be live streamed to the public: additional details will be shared here at a later date. The theme for this year is: ‘Navigating the Decade Ahead: Implications for Monetary Policy’. There will be many talks from Central Bankers including Jerome Powell (Chair of the Federal Reserve) and Mark Carney (Ex-chair of Bank of England from 2013 to 2020). Powell’s speech will likely review the Fed’s monetary policy framework and there is thought to be discussion regarding inflation targeting. 

Money Managers Take Bearish Positions in Bitcoin Futures

A brilliant article on Coindesk today that we will take a closer look at. 

The topic of the article is recent trading activity by money managers with respect to Bitcoin futures. Money managers or leveraged funds are essentially funds that borrow money to trade. In the week ended August 18th, bearish bets in bitcoin futures from leveraged funds rose to record highs on CME (Chicago Mercantile Exchange). Specifically, leveraged funds increased their short positions by 110% to a record high of 14,100 contracts. The reason we have seen record shorts is due to the attractive ‘cash and carry levels’. 

Cash and carry is a trading strategy that seeks to utilise pricing discrepancies, you can learn more here. Put simply, it entails a long position in a security or commodity while simultaneously selling the associated derivative (specifically by shorting a future). The idea is that there is a misprice that will present an arbitrage opportunity. That is to say, you buy an asset on the spot market and take a sell position in the futures market when the latter is trading at a significant premium to the spot price. Let’s take a look at Bitcoin spot prices. 

Bitcoin spot prices can be compared with Bitcoin futures to see how the cash and carry plays out. Bitcoin futures, due to expire on August 28th, were trading at a premium of $400 earlier this month. The premium has declined to sub-$100 levels in the past three trading days (CME futures are closed on Saturday and Sunday) making carry trades relatively unattractive right now. 

Due to this ‘correction’ we will likely see a decline in short positions soon. However, this provides an excellent example of cash and carry trade opportunities as well as the increasing deployment of cryptocurrencies by hedge funds, yielding significant gains.

• DIA announced on Friday it has raised $15 million through the sale of its governance token. Decentralized oracles have been a hot topic in the last few weeks. After strong uptrends by both LINK and BAND, DIA was probably one of the more popular sales in the past few months. After a brief private sale, DIA managed to raise 15 million from the public sale of its governance token, through a so-called bonding curve distribution, as an attempt to sell and launch its token in the fairest way possible. At its current price of around $3, DIA has a market cap $24 million. Read more

• Barstool Sports’ Dave Portnoy sells his Bitcoin, calls Link Marines ‘weak’. Dave Portnoy’s entry into crypto was short-lived. After publicly announcing that he had bought more than 1 million dollars worth of bitcoin and altcoins like LINK and OXT, the famous day trader pulled out his investment after the first real pullback last week, claiming that he could make more in the stock market that makes new highs every day. Will he be back? Read more.

• Cybersecurity firm finds hidden Monero mining malware on AWS Marketplace. Cybersecurity firm Mitiga found a hidden mining malware in a public instance of an Amazon Web Service (AWS) virtual machine. Reportedly, the malware would have infected any device running the instance with the purpose of using the machine’s processing power to mine the privacy coin Monero, which goes by the name “cryptojacking”. So far, there are no details as to download amounts. Read more.

Source: Epicgames

• Markets Risk-On Following Signs of a Coronavirus Vaccine. Risk assets kicked off the week on a high note: U.S. equity futures climbed and European stocks rallied to a one-week high. AstraZeneca Plc shares gained 3.8% and travel stocks including American Airlines Group Inc. and United Airlines Holding Inc. rose in pre-market trading. The dollar weakened against its peers, while gold traded near $1,950 an ounce. Market sentiment was supported by news over the weekend that the U.S. Food and Drug Administration is working to expand access to a virus treatment involving blood plasma from recovered patients. Separately, there are signs that the Trump administration may fast-track vaccines and treatments for the coronavirus. The Financial Times reported that the Trump administration is considering whether to bypass regulatory standards to accelerate an experimental vaccine. Read more.

• Apple Fires Back in Court, Says Epic Games CEO Asked for Special Treatment. It all began when Apple removed ‘Fortnite’ from its App store after the games publisher attempted to circumvent its 30% commission charge. Epic Games released a direct payment mechanism inside Fortnite to bypass the App Store’s payment system (and therefore Apple’s cut). It was this move that prompted Apple to remove Fortnite from its store for violating its policies. Fear not, people who already have Fortnite installed on their iPhones can continue to play (but you cannot update or download the app for the first time). Epic sued Apple in an attempt to force it to change its business practices and launched a ‘Free Fortnite’ marketing campaign portraying Apple as the villain. Microsoft has also piped up to claim that Apple’s actions will hurt the entire video game industry. In recent news (and as the lawsuit progresses) Apple has made its first significant legal response to Epic Games. Apple responded to Epic Games’ lawsuit accusing it of anti competitive behaviour in how it controls the App Store by claiming the Fortnite maker’s actions violated Apple’s rules. Further, Apple alleges that Epic Games asked for an individual/special arrangement with Apple, producing three emails from Epic CEO Tim Sweeney that bolster its claim. Read more.

• How Will Bitcoin React to ‘Warren Buffett’ Index Latest Levels. The ‘Buffet Indicator’ is hinting that the U.S. stock market is currently at dot-com bubble levels. For those who don’t know, the indicator divides the Wilshire 5000 Index by the GDP of the U.S. The historical average of this indicator is 1. Before the dot-com bubble, the indicator hovered at 1.71. Needless to say, at current levels of 1.7, the indicator suggests that the stock market is highly overvalued. If the U.S. stock market slumps as investors fear the overvaluation of equities, Bitcoin could see a major reaction. Certainly we have seen increasing evidence of institutions considering Bitcoin a legitimate source of value. In the last few months, the Bitcoin relationship with macro trends has been fascinating, so it will be interesting to see how this pans out. Throughout the last four months, Bitcoin has shown correlation with S&P 500 and gold (covered in a previous Markets Meditation) and since around late July, we have seen a closer correlation with the price of precious metals. Read more. 

How I Became a Profitable Day Trader in 1 Year

I tried something really different. Shared my personal journey while throwing in as much educational content as I could. Even tried to level up the video editing.

Key Takeaways:

• Make sure you have a solid Mathematical Foundation. People invest crazy amounts of time into learning the most complex trading strategies before they even have a fundamental understanding of %s and ratios. Build your house on a solid foundation.

• Start with the basics, only add more if you need to. I’ve put together a comprehensive guide to equip you with all the necessary tools needed to learn this. As a special announcement for Market Meditation readers, I have started preparing the second module of this course which will cover everything you need on risk management. Tag me in a tweet and let me know if you’re looking forward to this.

• Never neglect your health. Most jobs you can get away with a few days or weeks of sub-optimal performance. In trading, this could destroy you. The foundation of my health, my 4 pillars if you will are meditation, sleep, diet and exercise. Continually improve these.

Growth and comfort never coexist

If you never push yourself outside of your comfort zone, you will stop improving and even get worse over time. This is a fundamental truth that applies to any practice you are trying to improve, whether that is gaining physical strength or trying to learn a new skill.

Take going to the gym as an example. In order to gain muscle, we have to put ourselves under sufficient stress, literally destroy our current muscle fibers and then we build during recovery. Too much stress will cause injury. Sticking to the same weight over a prolonged period causes our body to adapt and eventually stop growing. 

The trick to improving, whether in the gym or life, is to always perform at the right difficulty, proportional to our skill level. Finding that sustainable middle ground, the “stretch zone”. In order to continuously improve, our brains and muscles need to be challenged, we have to go out of our comfort zone. Remain in the stretch zone, where we are constantly being challenged without increasing the difficulty too much so that improving becomes ineffective and causes us to lose motivation.

The past month I’ve launched the Market Meditations newsletter and podcast, I’ve shared deep personal videos on Youtube and more all while making time for my passions trading, meditation and calisthenics. This puts me out of my comfort zone.

I challenge you to leave your comfort zone this week.