Understanding September's Market Volatility

If you talk to anybody that's in the credit markets, if you talk to anybody that's in private equity, um obviously hedge funds, whatever it might be, people are somewhat cautious in terms of the really uncertainty pertaining to the election. Um And I, I tend to think that the election impact is typically oversold and that just the general uncertainty, you know, will typically play out overall. It's Thursday, September 5th and this is Markets Daily hosted by me Jen Sani. On this show, we navigate the currents shaping the crypto markets, providing insights against the financial landscape. So whether you are actively trading or simply fascinated by the volatility, that is the crypto markets. This show is your compass to understanding what's happened where we are and where we're going. Good morning. Everyone on today's show, we have general partner at innovating capital and co-founder of Pastel Network, Anthony Georgian, Anthony, welcome. Thanks for having me. Of course. Well, if we take a look at what's going on in the markets this morning, Bitcoin is down below $57,000 talk to me about what you're watching and what you make of the most recent market downturn. Yeah, I think there's generally a lot of uh risk off sentiment right now in the market and that's obviously impacting visual asset prices. Um Obviously, we saw some of the initial ad P data that came out this morning that really demonstrates that unfortunately, tomorrow's job report may also not be as rosy. Um And the fed will need to act in a much more dovish manner. Now, historically speaking, obviously a steep cut in rates would signal a risk risk on sentiment overall. Uh But the fear right now is that we're in really stagflation period. And if you taper that in with respect to really where the dollar is overall, um The dollar is at crazy lows relative to the euro to the yen. Um There's sentiment and fear that 2025 could trigger some sort of us dollar crisis, uh which would then lead to obviously a reversal of rate hikes and steeping in consumer prices, uh kind of spiraling out of control in sorts. So in the short term, it's led to a lot of volatility and digital assets. Um But again, these sort of sentiments and and fears that are driving that narrative right now are really part of the reason why uh Bitcoin has been so persistent as a digital asset overall. Now, we're at the beginning of September. What's your outlook on performance this month? Yeah. Well, September actually has been somewhat of an interesting month historically. Um for Bitcoin, I think it's historically seen almost a 25% peak to trough decline. Um So it actually has usually been a somewhat volatile month and a lot of that's really driven by kind of some of the post summer bowl sentiment and things like that. Uh you know, lack of volume and liquidity over the kind of waning summer months. Um this year, in particular, with really the highly anticipated rate cut, um you have this layer of complexity to what degree is the rate cut kinda come in at. And then, you know, more importantly, the overall um guidance from the fed pertaining to how fast are we going to cut rates and hold them this low. Uh As we saw with obviously the rate hikes, it wasn't necessarily the nominal overall interest rate that we achieved, but it was the accumulated accumulated rate, how long they kept the rates that high for? So understanding a little bit of guidance in terms of how Dovish the FED is gonna be. Um And then in tandem, some of this overall economic data that could support strengthening of the US dollar is really sensitive right now. And I think obviously in anticipation of election as well, um there's a lot of uncertainty and risk off sentiment. Well, everyone's talking about the election. I think there's probably a story on coin desk or at least two stories on coin desk every day that talks about what's going on in the election as it pertains to crypto. I know we talked about the markets heading to towards the end of the year. A lot of folks who have come on this show have said, you know, they're kind of sitting it out and waiting until November to see who is in office. What that means for economic policy, um for yourself. What's your thesis here when it comes to the election? What are you going to be doing? You know, that sort of sentiment is really permeating through all asset classes. If you talk to um anybody that's in the credit markets, if you talk to anybody that's in private equity, um obviously hedge funds, whatever it might be, people are somewhat cautious in terms of the really uncertainty pertaining to the election. Um And I, I tend to think that the election impact is typically um oversold and that just the general uncertainty, you know, will typically play out overall, in essence, it doesn't necessarily have as much of an impact as the markets prescribe it to that being said, obviously, you know, when it comes to the current landscape and digital assets, there's obviously a clear dichotomy with respect to overall digital asset support. JD Vance has obviously been a long term proponent of digital assets. He's been very active in Congress trying to push forward um clear cut regulatory frameworks um which has potentially been lacking um with regards to the other candidates that have been running for president at this point in time. So I do think that um in this particular election as it pertains to digital assets, having obviously a voice um in the White House that has been a long term proponent of the digital asset market will bode well for more certainty around regulatory frameworks and clarity. Now you just said there that this narrative around elections and crypto markets might be a little bit oversold, dig a little bit deeper into that. For me, what do you mean? Well, things don't necessarily, you know, happen overnight, right? And obviously, that's this is one component of the underlying economic landscape. And we have three branches of government for a reason. Um Obviously, you know, historically speaking, we if you look at the last cycle, um obviously coming from, you know, GOP to Democrat, uh there were very similar sentiments with regards to their influence over the Federal Reserve, for example, um reaction reactionary influence to economic uncertainty and data at that point in time. Now, of course, obviously, you know, each party did have different fiscal policy measures. Uh one of which did probably spiral inflation a little bit more out of control than it needed to be. Uh but inflation wasn't gonna run rampant, irrespective of that. Um Obviously, you have the tax component. Um but we're now seeing somewhat bipartisan support for both candidates as recently as yesterday to achieve more of a pouring back of corporate tax rates and whatnot and even some of the tax initiatives that the Trump administration had put in place. Um It was difficult to pour that back completely under the Biden admin. Uh and they fell short of, of doing so. So, you know, while there is a certain narrative to each side, you know, when it comes down to it, it takes time for certain of these influential changes to actually take place from my perspective. What's really most important is the acceptance of visual assets by a candidate and the acceptance and willingness to push forward that regulatory guidance and framework that will really move the needle. And in my perspective, there's one clear party that's um exerted and demand and effort to do so. Are we a little bit too us focused? Do you think when we talk about the impact of the US elections on the crypto markets? And I say that because there are so many jurisdictions that have made at least a little bit more progress than we have here in the United States. Um Crypto markets have reacted accordingly. Do you think that we focus too much attention on what's happening here in the US? Absolutely right. We obviously lived in a globalized economy and the US dollar and the US economy is just one of many at the end of the day though it is the largest economy. Um and it does drive a lot of framework for, you know, certain first world economies that exist. Um And I think in this particular instance, it's more the fact that we've been behind the curve with regards to crypto adoption. And it's left certain nations on the sidelines, it's left certain asset classes on the sidelines. You know, it's left really a lot of innovation on the sidelines as well. Um venture capital, certain institutions, things like that. So, you know, that's really the standpoint and lens that I look at it as um from a pure economic perspective, obviously, the US dollar flowing into the economy is, is still very, very much so imperative across the globe. We don't have the petrol dollar anymore per se, but in other aspects of the market, very much so is, and I think what's more important is the weakening of the US dollar. And what that could mean for really a cascading effect on really a globalized economy that's predicated and built on very much so debt based monetary policy system. Um If you go back to why Bitcoin was created uh very, very similar context here. And so should we see continued weakening of the dollar and an overall dollar crisis? Um It could have more critical cascading effects that would ripple through many of the first world, second world, third world economies around the globe, which should in theory spike the demand for uh decentralized digital assets, which is obviously part of the head here. You know, the people who listen to this show, uh listen to get alpha into what's going on in the crypto markets. They try and apply that to their own bags, given everything we've talked about. Right. How would you be looking at a portfolio this morning or portfolio allocation? You know, I've never been a short term buyer. I've, I've, you know, bought Bitcoin in the, you know, three and four figure range. I've bought, you know, Bitcoin at all time highs. Um It, to me it's, it's an important, probably the most important asset in the world right now for a variety of reasons that I mentioned economic, political, monetary policy driven. Um And I think it's, it's important for the audience to really evaluate their overall um portfolio composition and the lens of digital assets to really understand, you know, the, the true narrative here and why Bitcoin is so important um obviously size accordingly. Um you know, but from my perspective, there's, you know, never been a greater time to think about acquiring a decentralized, you know, perfectly decentralized digital asset that serves so many use cases and those use cases are growing and some of those free call options that I used to think maybe not, would not pan out like currencies or even, you know, application uh type ecosystems are starting to pan out. It's becoming much more exciting to and, and relevant um to hold Bitcoin, even though we might see some short term fluctuation of volatility, it's irrelevant to, to really the what I would view as more near term and medium term thesis playing out that could honestly start happening in the next 3 to 6 months. Is there anything that worries you or scares you uh about the crypto markets? Right now? I view the crypto markets as very much so the economy, right? You have one side that is the um commodity and currency type players, you know, the Bitcoins of the world, right? And then on the other hand, you have the more uh web three type ecosystems, you know, the Ethereum, the um general PLL ones that can service a variety of different gaps. I would say I'm, I'm more worried on the latter with respect to certain regulatory hurdles that we're continuing to face. Obviously, we saw what happened with open sea this week. Uh We're seeing what's happening with respect to the scrutiny of NFTS overall, which to me are one of the pre eminent use cases of Web three, you know, not just J PGS or digital photos, but, you know, true um tokenization of real world assets and things like that, that can take many shapes and form and disrupt a lot of different um economies. And so, you know, from my standpoint, that side of the market um does have me a little bit worried with this sort of regulatory Wild West that we're in with the SEC. And obviously that goes back to um obviously my opinion with regards to the political landscape and how that could both alleviate or exasperate those issues. All right. Well, that's the sector that you're maybe a little bit worried about. Is there a sector that is looking very promising to you as we head into the end of the year and into 2025? Is there something um that you think is really gonna stand out next year? Whether that be, I don't know, layer twos DK technology, whatever A I tokens. Uh is there something that you think like? Wow, if I were to look into my crystal ball, I think this is what the narrative is gonna be about next year. Yeah, you know, it's, it's interesting um there's been a huge resurgence in the Solana ecosystem, for example. And Solana overall is not necessarily requisite for L twos or certain scaling solutions by the nature of how it's been developed, it doesn't require such um so arbitra and things like that aren't necessarily required. Um That being said there are a lot of key interchange solutions that have been coming to the market. Um you know, application specific L ones that are, are true interchanges, you know, not scaling solutions but you know, not general purpose. L ones um that really will find a key position in the market in a lot of these ecosystems in the coming months as the salon of the world continue to operate in effectively their own island. Um and not necessarily latching on to the thesis of interoperability Uh and so keeping an eye on those types of players to me is, is a really important part of the market that I think will drive. Obviously certain Alpha Anthony, we are going to have to leave it there. Thanks so much for joining Markets Daily today. Thank you and thank you to everyone who watched and listened to this show. If you like listening to Market Staley, subscribe to the Coin Desk podcast Network that is available on all podcast platforms. 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