Short IXIC, Long Cryptocurrency into the New Year
1. Falling US inflation and rising US fed rates have yet to intersect. They will in 1H'23.
USIRYY
FEDFUNDS
2. US M2 tightening has reached 3%, but alllowing for some growth, it needs to go (linearly) another 6%-9% for a total of 9%-12% down from its previous all-time-high.
USM2
3. IXIC is down 35% from its previous all-time -high, but may have to go (geometrically) another 35% for a total of 58% down.
IXIC
4. Cryptocurrency global market capitalisation is at a mere 3.5% of US M2, and has already dropped 60+%.
TOTAL
Conclusion :
USIRYY
FEDFUNDS
2. US M2 tightening has reached 3%, but alllowing for some growth, it needs to go (linearly) another 6%-9% for a total of 9%-12% down from its previous all-time-high.
USM2
3. IXIC is down 35% from its previous all-time -high, but may have to go (geometrically) another 35% for a total of 58% down.
IXIC
4. Cryptocurrency global market capitalisation is at a mere 3.5% of US M2, and has already dropped 60+%.
TOTAL
Conclusion :
- US tech equities may be at fundamental 2Y-forward fair value already, but short-term trading factors will harass prices for much of 2023
- These short-term risks may be priced in quickly in 1Q'23, otherwise IXIC trades sideways all year, as earnings calls gradually catch up with M2 tightening policy.
- Meanwhile, as soon as inflation intersects with fed rates around 5.40%-5.70% between 22Mar'23 and 3'May23, optimism will impact crypto before IXIC.