Modern Markets - 22.0

Twitter hacked, Coinbase Ready for Spotlight, Bankrupt Companies Bonus Out

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Coinbase IPO

(Image Courtesy of TechCrunch)

The cryptocurrency exchange Coinbase is preparing to take itself from the private to the public sector. The San Francisco-based company may be looking at a 2020/2021 debut. The company has not registered its listing with the SEC but rumored is to be meeting with investment banks and law firms in preparation. 2019 saw no official earnings release but Coinbase saw a possible $8 billion valuation in 2018.

With such little information forthcoming, a number of questions have yet to be answered. Specifically, whether Coinbase will try to time the market with its public offering. The crypto markets are correlated with the stock markets and the continued bull run in stocks could see a strong break for Bitcoin above $10,000. If the altcoin market follows the trend, it could create a more fertile ground for Coinbase.

Coinbase may choose to list more assets going into 2021 in order to boost its exposure. It recently added Algorand to its offerings this week, a 25% increase in ALGOs price followed.

Twitter Hacked

(Image Courtesy of ThreatPost)

Late morning on Wednesday a number of Twitter accounts began acting suspiciously. High-visibility accounts like Elon Musk and Bill Gates began tweeting a common scam, asking users to donate Bitcoin to an address to receive twice as much in return.

While crypto veterans were quick to denounce these scams, hundreds of people fell prey to the ploy. The tweets soon were spotted coming from accounts like Jo Biden, Kanye West, and Kim Kardashian. The Bitcoin donation address changed several times, with some accounts being emptied hours after creation. One address had over $100,000 before transferring out.

Twitter responded from its support account, freezing verified Twitter users before allowing them to continue posting. It later blamed the attack on social engineering, a hacking technique that relies on exploiting people for weaknesses instead of computer systems.  

“A coordinated social engineering attack by people who successfully targeted some of our employees with access to internal systems and tools. We know they used this access to take control of many highly-visible (including verified) accounts and Tweet on their behalf. We’re looking into what other malicious activity they may have conducted or information they may have accessed and will share more here as we have it.”

Twitter’s stock dropped momentarily before continuing its upward push.

Is This Alt Season?

The crypto market has had a strong bounce this year. While Bitcoin struggles to break out of its range in the $9,000 range, the altcoin market is soaring. Several prominent cryptocurrencies have posted incredible gains in 2020 including ChainLink, Tezos, and Basic Attention Token.

These three cryptos have all gone up in double-digit percentages this year despite the COVID-19 drop in March. At one point LINK traded just under $9.00 before heading back down after a sharp selloff. 

The rise in these coins as Bitcoin trades sideways has made some pundits on Twitter call for “Alt Season,” a time when coins other than Bitcoin have massive gains over a small period of time.

The last alt season came in late 2017 when it was not uncommon for digital assets to double or even triple their value overnight. The cause for this can be varied, ranging from Tik-Tok pumping Dogecoin, or Cardano rolling out its main net launch. Market cycles, (the cyclical nature of assets) are also accelerated as crypto trades 24/7. 

Bank Reports Fail to Boost Sector

(Image Courtesy of Deccan Herald)

This week a number of banking institutions have posted their quarterly earnings with mixed results. Diligent readers will recall that these banks were responsible for issuing the PPP loans.

Several large banks saw their stock pump on their earnings news. Citigroup and JP Morgan posting greater returns than expected. In contrast, Wells Fargo and posted losses and cut its quarterly dividend by 80%. 

Neither good nor bad news could bring banking stocks any relief, with the entire sectors trading down shortly after the news. 

JP Morgan and Wells Fargo are earmarking billions of dollars in bad loans to write off, $10.5 billion, and $6.4 billion respectively. This combination of residential and commercial loans shows the economic pain as businesses are unable to cover costs due. JP Morgan CEO Jamie Dimon continues to be pessimistic about the future of the economy "Despite some recent positive macroeconomic data and significant, decisive government action, we still face much uncertainty regarding the future path of the economy.” Writes off bad loans into profit

All Federal Reserve, All Day

Far from sitting idly by, this week the Fed promised: “unlimited financial asset purchases to sustain market liquidity.” As we have previously reported, the Fed is purchasing large amounts of US Treasury notes in order to ensure the flow of liquidity. These funds are signaling strength in the markets, the opposite of what is occurring in the economy.

Andrew Brenner from international fixed income at NatAlliance told Reuters: “COVID-19 is now inversely related to the markets. The worse that COVID-19 gets, the better the markets do because the Fed will bring in stimulus. That is what has been driving markets.”

This disconnection between perception and reality continues as failing US companies paid out record bonuses to their top leadership. A 2005 law forbid such payments from happening once a company declares bankruptcy. However, a legal loophole says nothing about handing out bonuses before bankruptcy is declared.

Fed Reminds us Things are Bad

Despite its heavy-handed approach to buying corporate bonds and inflating its balance sheet, the Fed is still issuing warnings. 

“If we can get the public health issues under control either through a really robust mitigation strategy or a vaccine, then we can reengage in economic activity really quickly,” said Mary Daly, president of the San Francisco Fed.  said Wednesday in a virtual Washington Post Live event.

Failing Companies Bailing Out Top Brass

J.C. Penney in particular seems adamant about handing out large sums of money to its top leadership. CEO Jill Soltau received close to $10 million in May. The company declared bankruptcy two days later.

It’s beginning to feel like the Great Recession in this respect, though the stock market is still moving higher.

Kaltoro
@kaltoro_

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