June's Market Recap: The Domino Effect
More on everything in the markets that happened in June & where we go from here
Dear Sunday Investors:
Welcome back to this month’s edition of the Sunday Investor! To all members, we will be experimenting with a new format this week so let me know you all like it. This Sunday, we will be going into a recap for the markets in June starting the top 5-10 news articles of the month, TLDR of the markets in June, the top Twitter threads of the month, and then more details on what happened in the last month and what to watch in the coming months while ending with our memes of the month and the conclusion!
As always, read, enjoy and share The Sunday Investor with any friends
Best News Articles Of The Month
The S&P 500 lost 20% this month making 1H 2022 the worst start to a year for stocks since 1970 - CBS News.
US Inflation Quickens to 40-Year High as June CPI creeps up to 8.6% - Bloomberg.
Minutes from the Fed's June policy meeting also showed members were likely to boost rates by 50 to 75 basis points (bps) at their July meeting. Last month, policymakers increased the federal funds rate by 75 bps, the biggest increase since 1994. - Investopedia.
Dollar continues dream run, little stands in its way due to aggressive Federal Reserve interest rate rise expectations and safe-haven appeal stemming from global recession fears - Yahoo Finance.
Crypto markets continued on a downtrend as BTC and ETH were down 30% and 44% respectively over the last 30 days.- Bitcoin News.
Cryptocurrency hedge fund Three Arrows Capital (3AC) filed for Chapter 15 bankruptcy. 3AC managed about $10 billion in assets just as recently as March. 3AC’s turn in fortunes is the start of the domino effect that’s brought down stablecoins and sent Bitcoin’s value plunging. - The Verge
3AC starts the domino effect of CeFi Lenders downfall with their mismanagement of funds. BlockFi gets bailed out by FTX, Voyager declares Chapter 11 bankruptcy and Celsius fights bankruptcy as 3AC defaults on hundreds of millions of dollars of loans given by these platforms. - Yahoo Finance & Fortune
UK Treasury to Introduce Stablecoin Regulation Within Weeks & US Soon to Follow - pymnts.com
June Market TLDR
Stocks have worst start to the year since 1970
US inflation rises to 40 year highs
Dollar value rises as investors fear increases
Rates increase at record amount since 1994 and continued rate hikes expected this month to battle inflation
Crypto market continues downfall with BTC and ETH down by over 30%
Crypto Hedge Fund 3AC’s mismanagement of funds causes domino effect of crypto market downfall & CeFi lenders (Celsius, BlockFi, Voyager) to fall
Hints of crypto regulation to finally come in the near future in UK/US
Elon Musk Attempts To Pull Out Of Twitter Deal
Top Twitter Threads Of The Month
Top Videos Of The Month
The Defiant Recap of the Month:
Crypto Giant Binance’s Founder & CEO CZ’s Bear Market Plans Interview:
Teams Still Building Through The Bear Market
With the bear market throughout all risk-on assets including crypto in full steam, it is easy to look past the work being done by development teams to come out stronger for the next bull market cycle. Below is more information on what two of the many teams are doing now in the bear market to continuously innovating their product:
dYdX:
On June 22, one of the largest decentralized exchanges dYdX sent out the twitter thread below with the plans to rebuild their exchange platform on a standalone Cosmos blockchain. Being initially made on Ethereum, this shocked some of the crypto community.
As Defiant says, dYdX’s move away from Ethereum comes after its previous iteration, called V3, is a flagship deployment on StarkEx, which is a Layer 2 scaling solution for Ethereum.
More on the dYdX team’s announcement and what this means for DeFi exchanges below:
Aave:
Aave has submitted a proposal to the Aave governance forum for the creation of a new stablecoin, called GHO.
The GHO stablecoin would be decentralized and over-collateralized in a similar fashion to Maker’s DAI, with users being able to mint the token against crypto or stablecloin assets they have supplied to the Aave protocol.
Assets backing GHO would continue to earn yield while being used as collateral. Aave says the vision behind the stablecoin would be to push adoption through Ethereum Layer-2 platforms while also benefitting their community along the way.
Risk-On vs Risk-Off Assets
As Investopedia puts it, risk-on risk-off is an investment setting in which price behavior responds to and is driven by changes in investor risk tolerance. Risk-on risk-off refers to changes in investment activity in response to global economic patterns.
When there are periods where risk is perceived as low, this theory states investors tend to engage in high-risk investments.
The other way around, then there are periods where risk is perceived as high such as right now, the theory states investors would gravitate towards lower risk investments.
Risk-On Asset Examples: Equities/Cryptocurrencies
Example of Risk-Off Asset:
Series I Savings Bonds: (9.62% Interest Rate Until Oct 2022)
I Bonds are safe investments issued by the U.S. Treasury to protect your money from losing value due to inflation (Forbes) . Interest rates on I bonds are adjusted regularly to keep pace with rising prices. In addition, series I bonds are exempt from state and local income taxes, which makes them an even better risk-off investment for investors who live in high-tax states and cities.
An I Bond is a savings bond that earns interest based on combining a fixed rate and an inflation rate. The current rate for I Bonds is 9.62%.
The interest rate combines two separate rates:
A fixed rate of return, which remains the same throughout the life of the I bond.
A variable semiannual inflation rate based on changes in the Consumer Price Index for all Urban Consumers which is announced each May and November.
How Long Do You Have To Hold I-Bonds?
I Bonds earn interest for 30 years unless you cash them first. You can cash them after one year. But if you cash them before five years, you lose the previous three months of interest. (For example, if you cash an I bond after 18 months, you get the first 15 months of interest.)
Max Contribution Per Year: $10,000 directly through the treasurydirect.gov website
Memes of the Month
Next Article
Will be keeping my eye out for new content to write about in July while market uncertainty continues. As always, send in any questions directly to me or comment below on this post what you’d like me to write about or answer next!
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