September 28, 2022|Commentary

Commentary from the Desk: September 28, 2022

cumberland

This week, we are closely following two “buy the rumor, sell the news” events:

1. Macroeconomic developments and geopolitical fallouts
2. A new ATOM 2.0 narrative

1) Macroeconomic developments, along with a tense geopolitical landscape, are overpowering all other narratives:

  • The Merge was an incredibly difficult feat to accomplish, and many investors hope that the massive supply shocks—among other great aspects of the upgrade—would cause the price of the token to appreciate. Alas, ETH has sold off significantly post-Merge.
  • There’s been a lot of narrative hunting recently, but the macro outlook continues to be too bleak for investors to care about anything idiosyncratic. Top of mind (among several other macro developments):
    • Putin mobilizing troops, including calling up additional 300,000 solders. Russia’s economy is predicted to dive into a prolonged, deep recession due to sanctions and war costs;
    • Really poor timing of a mystery leak in two major Russian gas pipelines. The EU has said leaks in the pipelines from Russia to Europe were caused by sabotage - but stopped short of directly accusing Russia;
    • Bond yields continue to rise, likely soon to hit 4% for the 10 year Treasury and continue going irregularly higher. The Fed is likely to continue the acceleration until the jobs markets is impacted, along with other international markets;
    • The dollar index hit a new 20-year high of 114.78 on Wednesday, and was last up 0.39%. GBP has now fallen almost 22% against the USD this year, the most since 2008, and more than 7% against the euro. The recent turmoil led the BOE to today announce measures to buy long dated bonds.

2) Due to the ATOM 2.0 narrative, ATOM significantly outperformed the market over the last 30 days, with ATOM/ETH rallying from as low as 0.0071 to as high as 0.012

  • The new whitepaper was finally released on Monday (timed with the Cosmoverse event happening in Medellín, Colombia) bringing some significant upgrades including (but not limited to):
    • The Interchain scheduler: a blockspace market that capitalizes on MEV opportunities;
    • The Interchain allocator: a mechanism for aligning incentives between the Hub and consumer chains;
    • Interchain security and liquid staking, and introduced an updated monetary policy for the ATOM token;
      • NB: the updated monetary policy is likely a near-term headwind: inflationary pressures will likely be more than they are now for the first year, prolonging the inflation issues that the ATOM already faces
  • ATOM/ETH sank upon the release of the new whitepaper, now trading at 0.00986

ICYMI

The information (“Information”) provided by Cumberland DRW LLC and its affiliated or related companies (collectively, “Cumberland”), either in this publication or document, or on or through https://cumberland.io/, is for informational purposes only and is provided without charge. Cumberland is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of Cumberland’s sales and marketing efforts. Cumberland makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. Cumberland undertakes no duty to amend, correct, update, or otherwise supplement the Information. In addition, any person wishing to enter into transactions with Cumberland must satisfy Cumberland’s eligibility requirements.

The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. THE INFORMATION IS NOT A RECOMMENDATION TO ENGAGE IN ANY TRANSACTION. The virtual currency industry is subject to a range of risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or cryptoassets, and a still emerging and evolving regulatory environment. The past performance of any instruments, products or cryptoassets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. Investing in virtual currencies involves significant risks and is not appropriate for many investors, including those without significant investment experience and capacity to assume significant risks. Any person seeking to invest in or trade virtual currencies should do so only after engaging in their own research and obtaining their own advice as to whether virtual currencies may be appropriate in the context of their individual circumstances.

Cumberland is a principal trading and market making firm, and Cumberland may be subject to certain conflicts of interest in connection with the provision of the Information. For example, Cumberland may engage in transactions in a manner inconsistent with the views expressed in the Information, and transactions entered into by Cumberland could affect the relevant markets in ways that are adverse to a counterparty of Cumberland. If any person elects to enter into transactions with Cumberland, whether as a result of the Information or otherwise, Cumberland will be acting solely in its own best interests, which may be adverse to the interests of such persons.

Back to commentary