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September 28, 2022|Commentary

Commentary from the Desk: September 28, 2022

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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

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