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Myth Of Money: Did Powell Change His Mind?
Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
This last year, stock investors enjoyed “stupid” gains mostly decoupled from the real economy based solely on economic stimulus. The upward momentum was intensified once we had hope for a vaccine and couple look forward to reopening the economy. The housing boom lifted prices of commodities used in construction such as lumber and copper to all time highs. Bond yields climbed along with expectations of speedy growth and higher inflation.
This all changed this week, when the Federal Reserve suggested that it may rethink its low interest rate policies and that the super loose monetary policies may be coming to an end sooner than anticipated. Currently the interested rates are expected to rise in 2023 but that may change. Powell also suggested that the Fed may slow its asset purchases from the current $120B per month.
The S&P 500 slipped from near a record high, ending the week about 2% lower. “Value” stocks, which had performed particularly well since November, were hard hit. Lumber dropped 15%.
As a new week begins, investors will ask whether the shift signaled by the Fed warranted such strong reactions.
This Week By the Numbers 📈
The Dow closed out its worst week since October. Investors expressed concern over a potential interest rate hike to combat higher-than-expected inflation.
April, jobless claims rose week over week to 412,000.
Crypto markets continue to move sideways.
Top Stories 🗞
Hedge Fund Giants Druckenmiller, Loeb Back $70M Funding for Crypto Asset Manager Bitwise
Bitwise Asset Management – a crypto investment firm with $1.2 billion in assets under management that is trying make inroads in the country’s $20 trillion financial advisory industry – has raised $70 million at a $500 million valuation. The Series B round of funding was led by tech investor Elad Gil and crypto venture fund Electric Capital. Meanwhile, a who’s-who from the financial world also participated, including Daniel Loeb’s Third Point LLC, hedge funder Stanley Druckenmiller, financier Henry Kravis, Bridgewater Associates CEO David McCormick and Nadeem Meghji, a senior managing director at Blackstone. Read Full Story.
Paul Tudor Jones Could Go ‘All In’ on Inflation Trades, Wants 5% Bitcoin Allocation
Hedge fund manager Paul Tudor Jones told CNBC on Monday he would “go all in on the inflation trades” if the U.S. Federal Reserve remains indifferent to rising consumer prices. Jones sees BTC as a great way to protect wealth over the long run. The hedge fund manager discussed the potential implications of Fed Chair Jerome Powell’s insistence on characterizing the recent acceleration in inflation to the fastest in 13 years as “transitory.” Read Full Story.
Hedge Funds See 7.2% of Assets in Crypto by 2026: Report
Hedge funds expect to hold 7.2% of their assets in crypto in five years’ time, according to a survey conducted by fund administrator Intertrust. That asset allocation equates to around $312 billion across the sector. As many as 17% of the survey's 100 respondents expect more than 10% of their portfolios to be allocated to crypto in 2026. The funds surveyed manage an average of $7.2 billion in assets. North American funds predict their crypto exposure will be 10.6%, while those in the U.K. and Europe forecast 6.8%. Existing holdings in crypto across the hedge fund sector are, however, unclear, so it is not apparent how large an increase these figures represent. Read Full Story.
Bitcoin Drops as Hashrate Declines With China Mining Crackdown
Bitcoin dropped over the weekend amid a focus on Chinese mine closures and potential regulatory scrutiny. The hashrate in China is dropping significantly as Bitcoin mines are being closed. The city of Ya’an in the southwestern region of Sichuan has promised the provincial authorities to root out all Bitcoin and Ether mining operations within one year. According to a report in the Communist Party-backed Global Times, the closure of many Bitcoin mines in the province has resulted in more than 90% of China’s Bitcoin mining capacity being shuttered. Read Full Story.
Product of the Week: GDA Lending
This week I’m giving a shout out to my friends at GDA Lending. Having recently worked on a loan with them, I can say that they offer the best rates for collateralized crypto loans at 4.5%, with the lowest counter-party risk. If you are looking to borrow against your BTC or ETH, ping me for an intro here.
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Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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