Operation Bitcoin
June 8, 2021
–Little net change in fixed income yesterday as the treasury kicks off with the three year auction. Tens were up less than 1 bp at 1.567%. Implied vol declined, especially in ED’s. June midcurve options expire on Friday. The green midcurve 99.4375 straddle on EDM’23, which settled 9943, settled 4.75 and the blue midcurve 9875 straddle on EDM’24 (9876.5s) closed at 7.0. Reasonably priced, though perhaps slightly on the complacent side give CPI on Thursday.
–The action is in bitcoin, where the CME contract is 33000 this morning, down around 2650. Maybe those guys at the DOJ should be given a bit more credit. They apparently recovered the bitcoin ransom paid by the Colonial Pipeline, and immediately sold it, thereby pressuring all crypto. If bitcoin has become the safe haven alternative relative to USD, and USD has been weakening due to unrestrained gov’t spending and growing Fed balance sheet, then pushing down bitcoin will test the psychology of the market, and perhaps re-engineer confidence in the reserve currency. (DXY sub-90 yesterday). Next phase: make sure that bonds are solidly bid even in the face of a monster CPI number. Brilliant! Now they can let gold reclaim the mantle of safe haven… it’s a lot easier to manipulate.
–All joking aside, a Company called MicroStrategy is seeking to raise $400 million in a debut junk-bond sale at 6.25 to 6.5% yield. The funds will be used to buy more bitcoin. Let’s get this straight: I lend you money to buy bitcoin. Check. You promise to pay me 6.5%. If bitcoin doubles, I get 6.5% on my dollars. If bitcoin drops by 70%, you go out of business and I lose my principal. WHERE DO I SIGN UP? Now I see why it’s called Micro Strategy, because the macro amount of funds borrowed becomes micro. See, in Greek, micro means small. From big, to small, get it? it IS a joke! Maybe the whole DOJ crashing bitcoin idea isn’t so far-fetched.
