Decoupling trade in the making gets a Like from ProfZero! 👍🏻

20 Mei 2022

INVESTMENT CONTEXT

• In a remarkably divergent trade, on May 19 BTC regained USD 30k threshold and many Layer-1 currencies (ADA, ETH, XRP) moved up at least 4% while the S&P 500 headed towards the 7th consecutive week in red
  
• U.S. President Joe Biden is touring Asia in an attempt to launch the Indo-Pacific Economic Framework (IPEF), countering criticism that American interest in the region had mainly security components
  
• German industrial goods producer prices rose by 33.5% in April, setting a new record on the back of sharp increases in energy, metals and food prices
  
• Russia will increase its military presence in the West of the country, in response to "increased military threats" posed by Sweden and Finland joining NATO
  

PROFZERO'S TAKE

• ProfZero confesses a quite puzzled feeling after May 19 trading day. What started deeply in the red staged a rebound towards the end of the session, as tech stocks, and in particular blockchain equities (CoinBase, COIN; MicroStrategy, MSTR; RobinHood, HOOD) all surged at least 4.50% thanks to cryptocurrencies refusing to sideline in bear territory. ProfZero already noticed an interesting decoupling trade between the battered blockchain space and the market at large - yet prudence calls it too early to see a harbinger of a broader risk reversal
  
• The dramatic 33.5% increase in German producer prices in April reflects how Europe's leading economy struggles to keep up with soaring energy and commodity prices as well as growing supply bottlenecks caused by the war in Ukraine and Chinese lockdowns. ProfZero can't help but to see how a portion of such greater costs is destined to be passed on to consumers - thus inevitably putting pressure on household consumption in Q3-Q4
  
• ProfZero is not surprised about Russia's ambivalent reception of Sweden and Finland joining NATO - after all, on January 30, Nikolai Patrushev, the secretary of Russia’s security council, said "We do not want war. We don’t need it at all". True, in fact - no one needed that