Investors Are Buying Stocks, Bonds and Cryptos Again!

Hello, pack! 🐺

This is Howling Markets, the north star for all traders and investors navigating towards success in the financial markets!

Today we will be covering:

• What Are Altcoins?

• Solana’s Price Surge as FXT Fear Wears Away

•  Investors Buying Bonds and Stocks Betting That Interest Rates Have Peaked

•  Equity and Debt Markets Weekly Update

• And more!

EDUCATION

What are Altcoins?

The name “Altcoin” derives from the words “alternative” and “coin”, and it is a term used to describe any cryptocurrency apart from the market leader, Bitcoin.

However, it is important to note that recently most cryptocurrency enthusiasts and investors have started to exclude Ethereum from the definition of Altcoin, because of its size and stability.

As a matter of fact, Altcoins are regarded as intrinsically unstable, both in the supply and demand of the coins, mainly because in most cases they are still projects under development that change and evolve significantly overtime.

Over the years, the tens of thousands of Altcoins in the crypto market have been divided into six main categories:

• Payment Tokens: just like Bitcoin, payment tokens are designed to function as a medium of exchange and means of payment between two parties.

• Stablecoins: stablecoins are cryptocurrencies pegged to the value of a basket of goods, such as commodities, precious metals or other cryptocurrencies, significantly reducing the volatility of the coin. One of the most notable examples is the USDT, a stablecoin pegged to the value of the US Dollar.

• Security Tokens: security tokens are “tokenized” assets that are then traded on an exchange. The process of tokenization consists of transforming an asset (such as stocks, real estate, etc.) into a token to then be traded as such.

• Utility Tokens: utility tokes are used to provide a service within a network.

• Meme Coins: meme coins are coins created as a joke to go viral. They do not perform any activity or carry any value; they are purely used for speculation purposes.

• Governance Tokens: governance tokens grant the holder a certain right within the blockchain. For example, some governance tokens grant the voting right for changes to protocols or the coin.

NEWS

Investors Buy Bonds and Stocks Betting That Interest Rates Have Peaked

According to the Bank of America’s (BAC) monthly poll, published on Tuesday, fund managers are beginning to buy stocks and bonds believing that the monetary pressures from the central banks are coming to a halt.

More specifically, the poll indicated that 75% of managers believe that the Federal Reserve will not lift borrowing costs any further, signaling an increase in optimism with respect to the previous months. As a consequence, according to the Financial Times, “in November fund managers had the biggest bet on rising bond prices since 2009.”

Thanks to this optimism, most investors have started dumping their cash reserves into bonds and stock, causing a rise in equity prices and a drop in rates, which we will thoroughly examine in our weekly recap.

During the month of November, the average cash level of the polled mutual funds fell from 5.3% to 4.7%, reaching the lowest level since 2021. Considering that these mutual funds collectively control $553 Billion in assets, such a drop indicates that during November they have collectively invested more than $3.3 Billion so far!

NEWS

Solana’s (SOL) Price Surges as FXT Fear Wears Away

Solana’s (SOL) price, one of the most popular altcoins, is completely out of control, recording a surge of almost 90% during the month of November and of over 200% since the middle of October.

The story behind this surge goes far beyond both technical and fundamental analysis, and it is grounded on the extremely negative events that have been happening since the FXT scandal, trial and liquidation procedure.

Even though once the FXT scandal was discovered the entire cryptocurrency world faced some serious turmoil, what brought down SOL prices was FTX’s involvement with this specific coin.

At the time when FTX was a $32 Billion exchange, they held a billion dollar position in Solana tokens, contributing to the stability and price surge of this altcoin in the months prior to the disaster.

However, once FXT filed for bankruptcy at the beginning of November 2022, because of the exchange’s involvement in the project, Solana’s price dropped by more than 65% in a matter of a few days.

The recent optimism and surge in trading volume and prices has been determined by the end of Sam Bankman-Fried’s trial, which has prompted the prices back up, signaling a potential start of a new rally.

On the other hand, it is important to note that last Thursday Solana got hit by a significant “red” day, where most people took profits after the extraordinary 200% rally. Therefore, a short term correction is not entirely out of the picture.

Today’s Howling Question

And now, let’s test your knowledge about the US macroeconomic enviroment and the Federal Reserve (hint: we talked about this topic in the newsletter published on the 3^rd of November!).

Which is the current federal funds interest rate range?

a)  5.25% - 5.50%

b)  4.50% - 4.75%

c)  6.00% - 6.25%

d)  3.75% - 4.00%

e)  5.50% - 5.75%

We’ll show you the right answer and explanation after the last interesting piece of news!

NEWS

Equity and Debt Markets Update

Continuing on from our last week’s discovery of the divergence between interest rates and stocks, we can finally say that we have a winner.

When there is a divergence between interest rates and stocks, it is often the case that interest rates determine changes in stock prices, especially when they are extremely elevated due to the monetary tightening enacted by the Central Bank.

So, when we noticed stocks breaking over their resistance level, but rates still remaining elevated, we determined that stock prices weren’t out of the woods yet.

However, US government bonds interest rates (US10Y) broke down their support level and stocks continued to rally restlessly gaining an additional 2.10% between Monday and Thursday.

On the other hand, it is important to acknowledge that stock prices have reached another resistance level, and they are extremely overextended as a result of this 20-day-long rally. So, some short term volatility and possible retracement back to the previous resistance level should be expected.

Answer

The correct answer is a) 5.25% - 5.50%.

During October’s Federal Open Market Committee (FOMC) the Federal Reserve decided not to raise interest rates for a second time in a row, which are currently sitting, at the 22-year high, between 5.25% and 5.50%.

HOWL-WORTHY MEMES

🐺 See you next time!

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