Chart of the Day: Punks Doubled

JC Parets
July 17, 2022

Over the weekend we saw the price of Ethereum jump to new 30 day highs.

Looking a little deeper, you'll find that both Binance and Avalanche also hit new 30 day highs.

Some of you trade cryptos and others don't. But that's not really my point here.

As you've heard me say a million times by now, these crypto assets are just growth stocks (probably software stocks if you want to be more specific).

And the correlations prove it. They've never been higher, in fact.

So you've got the Nasdaq, and then further out on that growth curve (or "long-duration") you have specific growth stocks like Biotech, ARKK , Tech IPO stocks and things like that.

Then you can go out even further on that curve to find Crypto currencies. With that you've gotten both the exposure to growth and the added beta that comes along with Crypto assets.

So in other words, to the upside, you were better off in crypto than you were in growth stocks. And you were better off in growth stocks rather than the nasdaq as a whole.

But it works both ways, of course. To the downside, you held up much better if you were in the nasdaq instead of in those individual growth stocks that got crushed. And you were better off in those stocks than in most cryptos, some of which fell to zero.

So that's what I mean by that curve. I'm referring to both the risk associated with the asset as well as the added volatility that the risk brings, both to the upside AND the downside.

So sticking with that, my thoughts have always been that NFTs are even FURTHER out on that curve than cryptos.

So this is even one derivative past the others, adding an additional layer of both duration and volatility.

This is mostly in theory of course, because we don't have much data. But the data we do have points to all this being true and likely to continue.

For many investors, this is just not necessary. They've concluded that they have enough risk, or are taking risk in different ways. And that's ok.

For those people, I say great. But don't ignore the data here, because it can be very helpful.

A great example is the work we do in the bond market. I have never traded a credit spread in my life. I probably never will. But I watch them every single day. There's great data there.

I personally own and trade NFTs so I pay more attention to the asset than someone who doesn't. But even if you don't, there is good data there to monitor in the same ways that I follow what credit spreads are doing.

Check this out. Here's a chart of CryptoPunks which had been trending lower all year after peaking in 2021, along with the Nasdaq, Growth stocks and Crypto Currencies, of course.

But over the past month, floor prices for these "Blue Chip" NFTs have more than doubled.

So what does this mean?

It could mean absolutely nothing, just a dead cat bounce on the way to zero, "where they all belong", according to non-believers.

It could also be further evidence of a divergence for these growthy areas of the market that got slammed over the past year.

Remember, the Nasdaq outperformed last month and put in a higher low relative to the S&P500. This was while Interest Rates were still ripping higher.

Ethereum and other Altcoins are making new 30 day highs.

Cryptopunks and other major NFT projects have more than doubled off their lows.

Do you think all of this is not related at all?

It's just a big coincidence?

Let me know! We love to hear from you.

We're talking about all of this tomorrow night.

Premium Members, make sure to register for Monday night's Live Conference Call. If you can't make it live, the replay and slides to download will be available shortly after the completion of the call.

See you there!

Cheers,

JC

Filed Under