(Kitco News) Following the latest massive selloff, the overall crypto market cap is now below $1 trillion — that is billions of dollars vanished in the last few days. And even though the macro-environment remains unsupportive for risk-on assets until inflation slows down, the focus remains more long-term, according to Messari senior research analyst Tom Dunleavy.
“We’ve just had a perfect storm of really bad information for crypto,” Dunleavy told Kitco News. “We had Terra LUNA, which took us down pretty sharply against the broader challenging macro backdrop. Then on Friday, we had a surprisingly high inflation print. And then Celsius decided to freeze withdrawals.”
High inflation is already bad enough for crypto, but now there are fears of this firm going potentially insolvent. “That sent prices straight down across the board,” Dunleavy explained. The big worry is that Celsius will have to either liquidate assets or sell them at a discount. “That directly impacts the assets they may be holding,” Dunleavy said.
All eyes are also on the Federal Reserve’s interest rate decision, which is scheduled for Wednesday. The CME Fed Watch tool is now projecting a 93.2% chance of a 75 basis point rate hike on Wednesday and an 89.1% chance of another 75 basis point rate hike in July. Just days ago, markets were confident that a 50 basis point hike was as high as the Fed could go.
According to Dunleavy, however, more oversized rate hikes could have a surprising effect on crypto prices. “Any news that inflation is coming under control, whether by the Fed or market sentiment, will do wonders for risk assets. A 75 basis point hike would be positive. Any indication that inflation is cooling would be positive for risk assets, equities, and crypto,” he said.
On Tuesday, Bitcoin was last trading at $21,759, down 30% in the last seven days. And Ethereum was last at $1,176, down 37% in the last seven days.
A lot of leverage is already out of the system given how far prices have fallen, but there is always a risk of another firm like Celsius getting caught up in this and triggering a new wave of selloffs, said Dunleavy. “Everyone heard of MicroStrategy CEO Michael Saylor’s Bitcoin position. His margin call price is right around where we are right now. I’d watch out for Saylor and the Celsius situation. But unless we really get one of those liquidation candles that sends us 20%, 30%, or 40% lower, a lot of the leverage has been flushed out at this point,” Dunleavy described.
The one thing to watch is Bitcoin’s performance versus Altcoins, Messari’s analyst added. “If you look at Bitcoin prices during this selloff over the past 24 to 48 hours, it’s been Bitcoin that’s leading the way, rather than Altcoins, which is not typical. And that says to me that there are funds selling Bitcoin to clear out the leverage on their books,” he said.
Looking past the selloff: Ethereum to outpace Bitcoin
Inflation is not likely to abate until at least October, with the September PCE inflation print likely to be the first sign that could point to some softness in the numbers. For markets, this translates to aggressive rate hikes from the Fed until then, Dunleavy told Kitco News on the sidelines of Consensus 2022 that was held in Austin between June 9-12.
What this means for Bitcoin and Ethereum is range-bound trading until that softer inflation print is reached. “This is because you’re going to have the Fed raising rates, stop purchasing assets, and rolling down their balance sheet. All of those things are not good for risk assets. They’re not good for equity market liquidity, which is not good for crypto market liquidity,” the analyst said.
But crypto’s close relationship to the S&P 500 and the Nasdaq won’t last forever, with decoupling potentially not that far off, especially for Ethereum. “What decouples equities and crypto, and what moves Bitcoin and Ethereum away from the equity relationship? It’s one of two things. Either Bitcoin moves to be that full store of value asset — that gold 2.0 asset. Or Ethereum becomes that sort of world computer asset,” Dunleavy said.
Right now, Bitcoin and Ethereum trade on many different narratives that need to solidify into one. For Ethereum, this decoupling could come with the Merge (scheduled for August or September), which will transition the cryptocurrency to the more energy-efficient proof-of-stake protocol from the proof-of-work protocol (also used by Bitcoin).
With the proof-of-stake protocol, miners are no longer needed. Instead, people would stake their coins to check new transactions and add them to the blockchain. This would potentially consume 99% less energy than proof-of-work. “With proof-of-stake, you get lock rewards from the network, which is a certain amount of ETH per block, you get miner extracted value, which is sort of ordering transactions in the block. And then you get transaction fee revenue. A portion of it is burnt, and a portion of it is appropriated to the validators,” Dunleavy described.
Following the Merge, yields for just holding or staking Ethereum should be between 8% and 12%, said Dunleavy. “If you’re just thinking of Ethereum as sort of a quasi bond, the 8%-12% yield is important. The move from miners to stakers reduces energy consumption. So not only is it a bond, but it’s a green bond. Coming from someone who used to advise institutions, ESG is front and center right now. Those two things alone will make it hugely attractive to investors, potentially increasing demand,” the analyst said.
This is why Dunleavy sees Ethereum outpacing Bitcoin for the rest of this year and for years to come. “Bitcoin does some things very well. It’s a very good store of value. It has more history than Ethereum. I view Bitcoin as gold 2.0. But I don’t personally understand the use-case for actually using Bitcoin,” he said.
When looking through the lens of market caps, Dunleavy sees Bitcoin eventually reaching gold’s market cap of about $12.3 trillion. But for Ethereum, the potential is a lot higher.
“With Ethereum as the world’s computer — being able to execute any sort of potential smart contract — the actual market cap is potentially orders of magnitude higher than that of Bitcoin,” he said. “With Ethereum, people bring the analogy to the internet. It is because we didn’t know what the internet was when it first came out. That’s sort of what Ethereum is.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
