October has held many momentous market selloffs.
This October stands out for a different reason.
Instead of momentous selloffs like we saw in 1929, 1987, 2008 and to a lesser degree in 2018, This October marked the emergence of a new investment paradigm.
In October, Bitcoin (+29%) outperformed the S&P 500 (-2.2%) by over 31%, marking its break as another risk asset as investors appreciate its place in the growing digital economy.
Last month, I cited disappointment with Janet Yellen's understatement of the U.S. Government's debt/ GDP, 98% vs. 120%. The exclusion of the inter agency borrowing is disingenuous at a minimum. Apparently Moody's agrees.
This past Friday, Moody's credit rating agency changed its outlook in U.S. Federal debt to negative from stable.
Per Moody’s,
“This is the new environment for rates. Our expectation is that these higher rates and deficits around 6% of GDP for the next several years, and possibly higher, means that debt affordability will continue to pressure the US.”
This NOT the death of the U.S. as a super power, but it does invite change.
Including the ability of the U.S.
to fund two wars as Janet Yellen asserted last month.
And investors are not waiting to see what this new paradigm of higher rates, and record levels of debt does mean for the economy, equities and bonds.
In Friday's report, we present some metrics that validate what we call the The Great Immigration to Bitcoin and Ethereum.
Gone are the migratory behaviors of the tourists and scoundrels of 2021 - in their stead are immigrants that stay and build, e.g. BlackRock, Fidelity, Ark and before them firms like 3iQ.
And these firms are finding data to validate the build.
Spoiler Alert, both BTC and ETH have higher cash flow/ share (coin) than Visa, and Price / Book values that are more akin to NVIDIA and Microsoft than TradFi financial firms like JP Morgan and Visa.
Bitcoin's network functioning involves complexities that are beyond the metrics captured in a Price to Book ratio...but it is indicative of a legacy metric that incorrectly relays value in terms of tangible assets.
Back to the Signal of October.
The timing of our report, after October's performance distinction by BTC and as Moody's shifted its Outlook on U.S. Debt to negative is NOT serendipity, rather inevitable as we wrote here....
“The failure of SVB in March was a reminder that bank deposits can move in seconds, rendering a bank’s investment in bricks, mortar and centralized databases of limited utility.
Instead, we see the asset light, decentralized platforms that power BTC and ETH as the natural evolution in payments, settlements and the industry en masse.”
Full Report here: