MARKET WRAP

1. The Most Important Week of Summer for ALL Investors

CNBC – July 24, 2022 at 8:03pm EST

Before our typical round-up of this past week’s news in the world of crypto, finance, tech, and more, we’re bringing your attention to a quick discourse on what to expect this coming week, which is arguably the most important week of the season. Huge updates from the Fed, earnings reports from the largest companies, and GDP reports will dictate whether the rest of the year will be more bullish than expected… or an all-out recession. 

The news that will stand at the forefront of most investors’ attention is, as stated by Leo Grohowski, the CIO at BNY Mellon Wealth Management

“between the economic reports coming out, with respect to GDP, the employment cost index, and the Fed meeting – and the 175 S&P 500 companies reporting earnings.”

This week, investors will fixate on the earnings reports of the largest companies listed on the S&P 500, including Microsoft and Google parent company Alphabet, who will report on Tuesday, Meta Platforms, AKA Facebook, on Wednesday, and Apple on Thursday. 

Last week, the S&P 500 performed better than expected, ending with a 2.6% gain and with 75.5% of earnings coming in greater than expected. As of this past Friday, S&P 500 earnings were expected to grow by 6.2%, up from 5.6% last week. According to Art Hogan, the chief marketing strategist at National Securities

“the real tell will be whether the attitude of investors continues to be that the earnings season is better than feared.”

Looming large also is the Q2 GDP report, which will come out on Thursday and is expected to be negative by many forecasters. The outcome of the report, which – if negative, just like Q1 – is considered by many to be a telltale signal that we are bound for a recession. 

That being said, this is a simplistic definition of a recession; an official recession must be declared by the National Bureau of Economic Research, which considers a number of factors beyond GDP. According to KPMG chief economist Diane Swonk, who does predict a 1.9% decline, an actual recession would need to see unemployment rates increase by 0.5%. 

“The consumer slowed quite a bit during the quarter. Trade remains a huge problem and inventories were drained instead of built. What’s interesting is those inventories were drained without a lot of discounting. My suspicion is inventories were ordered at even higher prices.”

And, of course, the Federal Reserve’s Federal Open Markets Committee (FOMC) will be meeting on Wednesday, the main event this week. Based on the aggressive anti-inflationary rate hikes that have come out of the Fed this year, it is no surprise that “a 75 basis point hike is baked in the cake for next week,” as mentioned by Grohowski.

In all, it’s an important week for the global economy, as each of these announcements has its own effect on the outlook of the economy.

2. Ex-Coinbase Manager Arrested Along With 2 Others on Crypto Insider Trading Charges

CNBC – July 14, 2022 at 9:10am EST

Ishan Wahi, a former Coinbase product manager, was charged with wire fraud and insider trading alongside his brother Nikhil Wahi and Sameer Ramani. On Thursday, the Department of Justice (DOJ) alleged in a press release that Ishan had shared information regarding crypto assets listing prior to its public release to Nikhil and Sameer. The Securities and Exchange Commission (SEC) had also pressed charges in regards to the insider trading allegations.

According to the press release, Ishan had disclosed information on at least 14 different crypto listens on Coinbase. The defendants had supposedly used anonymous Ethereum wallets as well as wallets in other people’s names to purchase at least 25 different cryptocurrencies, profiting up to $1.5 million. The cryptocurrencies that were traded by the three included ALCX, GALA, ENS, and TRIBE, among others. 

While these allegations do involve Coinbase and its operations, Coinbase had released a statement.

“Coinbase takes allegations of improper use of company information very seriously, as demonstrated by our rapid investigation of this matter. Again, we have zero tolerance for this kind of misconduct and will not hesitate to take action against any employee when we find wrongdoing”.

Coinbase had launched its own investigation to address the claims of insider trading.

3. Tesla Dumps 75% of its Bitcoin Holdings

CNBC – July 20, 2022 at 5:58pm EST

Tesla has just published its financial report for Q2. It revealed that Tesla had sold 75% of its Bitcoin, worth $936M. 

Tesla financial report (Source: Macrochain)

In early 2021, Tesla bought a $1.5B BTC at $31,250. The market rose then and hit a peak at $67,566. Therefore, Tesla initiated the sale of its BTC with 4800 BTC (~10% of total BTC in its portfolio), worth $272M at the price of $56,000. Tesla grossed approximately $122M on profit-taking on its investment.

By Q2, Tesla continued to sell 75% of its Bitcoin with 32400 BTC, worth $936M (losing about $76.5M). The remaining BTC of the Tesla portfolio amounts to 10800 BTC, worth $248M at the BTC price of writing time. It means the total amount of money that Tesla had grossed from cashing out BTC was around $1.2B. In the case of cashing out the remaining, Tesla is only under the loss of $43.6M in place of the hundreds of millions of dollars. 

The historical price of Bitcoin (Source: Coinmarketcap)

The picture above shows that the Luna crash forced LFG to sell its BTC when BTC was at $36K - $40K to absorb the panic sell pressure from retail investors. Under the panic sell from retail investors and LFG, along with the adverse effects of Covid-19 on the market, the BTC price constantly dumped, putting Tesla in a dire circumstance. Understandably, Tesla did precisely what it should do for risk management to keep the ratio of assets and cash at an acceptable level.

Interestingly, in May of last year, CEO of Tesla Elon Musk declared that he would stop accepting Bitcoin for car purchases due to