Eoin Treacy's view

A link to this week's Big Picture Long-Term video is posted in the Subscriber's Area. 

Market detectives looking to explain the fury of Thursday’s Treasuries selloff will find most of the evidence pointing to technical rather than fundamental reasons.

A combination of supply indigestion, a potential $50 billion position unwind and vanishing liquidity exacerbated moves as traders aggressively repriced the Federal Reserve rate-hike outlook, despite no major economic developments or shifts in tone from policy makers.

“It wasn’t an orderly selloff and certainly didn’t appear to be driven by any obvious fundamental continuation or extension of the reflation thesis,” wrote NatWest Markets strategist Blake Gwinn in a note to clients. A number of more “technical-style” factors were in the mix, against a backdrop of a good-old-fashioned buyers strike, he said.

Eoin Treacy's view

In a bull market buying the dips always works. When buying the dips stops working, the bull market is over. That might seem tautological but it is the strategy every investor ends up following because buying the dips is the best risk-adjusted way of buying in an uptrend. That question will be discussed in every emergency meeting at fixed income fund management houses today and over the weekend.

This was a DATA ERROR. I spoke to Glassnode’s CTO during the cascade of liquidations and can confirm this was a wallet labelling error from an upstream data provider. (What we were actually seeing was an internal movement of coins inside Gemini exchange.) During this time, investment flows continued into Bitcoin’s network unabated with no shake-out of new investors. We can see this in the chart below where SOPR climbed against the sell off.

This is VERY unusual occurrence. SOPR can only climb against a price decline when recent buyers hold their coins, and new buyers are stepping in to buy the steady stream of coins being offered by sellers who bought a while ago carrying greater profit. In summary, new investors bought the dip while traders buying on leverage were liquidated.

Eoin Treacy's view

An additional odd occurrence in the crypto markets is that the Grayscale Bitcoin Trust is now trading at a discount to NAV. This is not the first time the fund has traded below book value and the trust has underperformed the bitcoin price by a considerable margin since March 2020. That suggests the aggressive fee structure and increasing availability of alternative vehicles for investing in bitcoin have robbed the fund of customers.

Chinese copper smelters grappling with a shortage of semi-processed material are set to see an influx of supply from South America, a sign that the tightness helping supercharge the metal’s rally may be easing.

Starting next month, there’ll be a large number of ships arriving at Chinese ports from Chile and Peru, the nation’s main suppliers, as bottlenecks ease, according to IHS Markit lead shipping analyst Daejin Lee. The amount of concentrate expected to reach the Asian nation may climb almost 60% from February’s volume, he estimated.

“The narrative could be shifting from very tight supply on account of port congestion and logistics difficulties, and even the waves in Chile, to more easier supply,” said Ed Meir, an analyst with ED&F Man Capital Market. That could take a little bit of the air out of copper’s rally, he said.

Eoin Treacy's view

Commodities are volatile and chasing prices that are already at elevated levels is seldom a useful exercise. One of the oldest adages in the commodity markets is “the cure for high prices is high prices.” The surge in copper prices has begun to encourage supply into the market. At least some further consolidation of recent gains appears likely.

Eoin Treacy's view

One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.