The Breakdown - The Mixed Signals Economy: The Breakdown Weekly Recap

Episode Date: July 11, 2020

On The Breakdown’s Weekly Recap, NLW explores: The final tally on the TikTok Doge viral campaign  The growing geopolitical tension between China and the US and where it’s manifesting  Positive economic indicators in reduced jobless claims Negative economic indicators in growing COVID-19 cases and deaths Why bitcoin is sideways Why Treasury yields are down Why gold is up  

Welcome back to The Breakdown, an everyday analysis breaking down the most important stories in Bitcoin, Crypto, and Beyond. This episode is sponsored by BitStamp and Crypto.com. The Breakdown is produced and distributed by CoinDes. And now, here's your host, NLW. Welcome back to The Breakdown. It is Saturday, July 11th, and this is the weekly recap. I think when the story of this week gets written, it's certainly hard not to point to Doge coin and TikTok as one of the more remarkable episodes, right? You saw this asset, which as we talked

about a few days ago on our show that was all about this, is effectively a dormant meme coin. People were very upset that I called it a dead meme coin. I'm sorry, Doge fans. We can at least call it a dormant meme coin, right? That was pumped in a significant way by, a campaign on this hugely viral platform in the form of TikTok, right? This hugely viral meme platform. And we saw significant impacts on the Doge market because meet illiquidity. It went up something like 35% at its peak. As of the recording, I'm recording this on Friday and it's down 15% in the last 24 hours.

So it's clearly gone down. But the volume went way up as well. The volume went up something more like 2,000%. You had Frank Shaparo from the block reporting that there were OTCD desks that he knew who were fielding calls about this thing. And, you know, there's so much, I mean, if you want to go explore more about what the real significance of this was, you can listen to that full episode. But I do think it's very telling of what you're going to see when this new category of day traders who came into these markets through Robin Hood, through Wall Street bets, through

Davey Day Trader Global Global, find their way into other types of assets like crypto, right? You're going to see a lot of these weird episodes. I think part of what makes this whole thing so much even more interesting in this immediate context is that we also saw this week, Donald Trump, the president of the United States of America, tweet out asking who thought we should ban TikTok. TikTok has become a central pillar in both the real geopolitical tensions between the U.S. as well as the narrative investment in the idea of a new Cold War. And what I mean by that is that there are a number of people in this administration in the U.S. in general who actively want there to be a Cold War-type conflict between the U.S. and China,

who have an interest in propagating that narrative rather than trying to find ways to cooperate to bring China further to liberalism. I think it's a really important conversation to be had about how possible that is, and I think, in fact, there are a lot of people who mostly disagree with Trump, who the one area that they find some commonality with is his approach to China, although to the extent that John Bolton's revelations are true in his book, which is itself questionable, they might not love that. But either way, the point is that China and the U.S. is obviously perhaps the most significant geopolitical relationship. And rightly or wrongly, TikTok and these social media apps are at the absolute epicenter of the current episode with that.

So the fact that that is the platform where this meme coin, again, was being pumped this week, makes it more significant than just your average little random crypto pump and dumb. BitStamp is the original global cryptocurrency exchange. Since 2011, BitStamp has been the preferred exchange for serious traders and investors, trusted by over 4 million customers, including top financial institutions. BitStamp is built on professional-grade trading technology. Their platform is powered by a NASDAQ matching engine, and their APIs are recognized as the best in the industry.

Download the BitStamp app from the App Store or Google Play, or visit bitstamp.net slash pro to learn more and start trading today. That's bitstamp.net slash pro. What's going on, guys? I'm excited to share that one of this month's breakdown sponsors is crypto.com. Crypto.com offers one of the most cost-efficient ways to purchase crypto out there, as they've just waived the 3.5% credit card fee for all crypto purchases. What's more?

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9,000 to 9,500 level. It really can't break out from that, which I think reflects just the larger mixed signal market, which is really the key theme that I see for this preceding week that we just had. One asset that did break out, however, is gold. Gold has had this persistent, technical, and psychological barrier at 1800 that it finally pushed up through this week. I mean, it's hovering really close. It was at 1804 when I was recording this, but it's important, right? and people think that it's real. Tracy Schuart, who was on the show a couple weeks ago, who's a specialist in oil and commodities, tweeted out, literally there is not one technical or fundamental reason to be short gold right now.

So a lot of folks who are very interested in that trade. And part of the reason, of course, that gold might have finally pushed through that barrier is, in fact, the mixed signals and starting to be creeping bad signals that we're getting around the COVID-19 crisis. First, in this mixed signals analysis, let's talk about what was good. Jobs this week, the jobless claims report, was better than it had been in previous weeks. You still had this enormous, more than a million new claims, which obviously anyone who's viewing these numbers in the abstract would find horrendous.

However, it was a bigger drop than expected, and realistically, that's what the market has been responding to recently, is whether the drop was more or less than expected. last week in the last couple weeks, it's been pretty anemic, right? People expected a bigger drop than there was, whereas this week, we expected to get to 1.375 million new claims, and instead we were at a much lower number, right? 1.31 or something like that. More importantly, and I said this the other day in the brief, the continuing claims got down to 18.1 after sticking pretty close to 20 million for a really long time. So that's a good signal, right? That's a genuinely positive or at least directionally positive signal. The other directionally positive signal was that we'd seen for a long

time, or for the last couple weeks at least, this interesting divergence where the case rate kept going up, especially in places like Texas and Florida, but the death rate was staying really low, if not going down. Earlier in the week, we were at, you know, a couple hundred deaths per day in the U.S., which sucks, obviously. These are human lives that shouldn't be trivialized or minimized. However, in some ways, the real question with COVID-19 is how to manage it, right? We're not going to be able to eradicate it until and presuming that some vaccine comes to market. But if we can manage it in some way that doesn't require full shutdowns, that fundamentally changes the dynamic of its impact on the economy and on our lives. Unfortunately, for three days in a row now, we've seen deaths up in the 800s. And those numbers are growing most in these same places that we're thinking, it seemed like that even though their caseload, were hitting all-time highs, their deaths were staying pretty low. That's not the case anymore. You're seeing deaths start to rise in places like Texas and Florida.

They're dragging the rest of the country with them, and it's not just those states. It's a huge number of states really across all geographic regions, although somewhat concentrated in the south. These mixed signals, which are admittedly now diverting more towards bad signals, have been just confusing for the markets. And again, going back to why gold might seem appealing right now, now, you have another safe haven trade treasuries, which have their lowest yield since the country started to reopen, which suggests that people are moving back to safety. And to the extent that

things like Bitcoin are being correlated right now to the rest of the market, you're seeing an ease off of some gains over the last couple days in Bitcoin as well. So I don't think you can realistically say that the markets are really pricing in one thing or another when it comes to coronavirus, what I do think you can say pretty conclusively is that they are concerned. They are worried that this reopening is a mirage, that we're going to have to go into some sort of lockdown or even scattered lockdowns again. This is exacerbated by the fact that you saw Hong Kong close its schools this week going forward and just added more sort of nervousness there. So all of these things are, again, just affirmation of the fact that the big trade right now is

what the hell happens with COVID-19. And at the risk of beating a dead horse, it would be a really good time at this point to throw out the political rhetoric, which has now taken on the I told you so element as well, and instead just focus on the same damn thing we've needed for months, which is increased testing capacity, really good contact tracing that doesn't threaten privacy and civil liberties, and the ability to live and coexist with this virus until we have the solutions to it overall. If we had just been addressing that, if we had just been getting people to take common sense precautions, if we hadn't politicized the issue of masks like dumbasses, maybe we'd be in a different place than we are, but we're not.

And so we languish and the economy languishes, and every time we think we're getting back on our feet, there's going to be something else that stops us. So it's a frustrating thing to see. It's a little annoying, I've got to tell you. I've said it before, and I'll say it again, we are living in the Groundhog Day economy, and it sucks. At least we get to hang out together, right, guys? I hope you enjoyed this week's content. There was a lot of fun stuff, a lot of great interviews.

Michael Krieger yesterday, Daniel LaCalle, just absolutely crushing the economic 101 on inflation and what it actually looks like. So anyways, I appreciate you listening and I hope that you're having a great weekend wherever you are. Until the next time, guys, be safe and take care of each other. Peace.