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- LUNA drop-kicked, markets rebound
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Kangaroo markets are back while LUNA hodlers (crypto) in shambles as the token dropped over 99.5% in just several days. Here's a breakdown of what's going on.
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Today's Letter
Market Update
Trending Cryptos
Top Meme Stocks
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Market Update
Kangaroo markets are back with the SPY falling nearly 5% earlier in the week before rebounding 4% into Friday's close. A wild week. SPY's 1-week chart is something amazing once Thursday afternoon and Friday came around.
Kangaroo markets usually mean more volatility is around the corner, so buckle up.
Also of note, we have just witnessed the second worst start to a year for the S&P 500 in history. However, here's a breakdown of how much the markets returned after such large losses to start the year beginning from day 91 to year end (returns for the final 3 quarters of the year).
Growth stocks have been the focus of this massive drawdown, so are they nearing "value" territory? This tweet with chart (Morgan Stanley) gives us a look at how EV/Sales/Growth multiples have contracted from 0.93x to currently 0.32x... Relatively speaking, this is below the:
at 0.41x, the 5-year average from 2014 through 2018
at 0.56x, the trailing 5-year average
So are we nearing a reversion to the mean, this time to *potentially* the upside as stocks are well below their 5-year averages and could be due for a rebound.
The story of LUNA - WTF Happened?
It's difficult to explain it all in layman terms, but here is my attempt to explain what happened (hypothetically speaking).
LUNA and UST are crypto coins that were related to each other in a 2-token model. $1 worth of LUNA could always be converted to $1 worth of UST, and vice-versa.
The thing is, UST coin was a stablecoin that always pegged at $1 USD, meaning $1 UST = $1 USD, which could also be converted to $1 worth of LUNA.
The team behind LUNA also used Bitcoin as a backstop in case the value of UST dropped below the peg price of $1 USD.
Long story short, a large amount of UST was sold at once to destabilize the $1 USD peg, which then relied on the BTC backstop, which also fell through the floor, and caused the entire system to death spiral into oblivion.
The end result was the crypto currency losing billions in market cap and over 99.7% in just a few days.
Here's the final result of what the chart looks like (from almost $100 to less than a penny).
Trending Cryptos
So what are the trending crypto currencies right now? Top 3 spots are being occupied by none other than:
Terra (LUNA)
Bitcoin (BTC)
TerraUSD (UST)
GRIT is going big or going home on the 20% of our “high-risk” portfolio where we know these investments could go to zero…or 10x! Subscribe to our new CRYPTO NEWSLETTER to follow us along this journey and see what we’re buying, why we’re buying it, what we’re paying, and what else is on our radar!
Top Meme Stocks
Social volume was up over 200% this week as many stocks made headlines for various reasons. At the top of the list was Tesla, CPI (inflation print), GME, COIN, and CORN (Bitcoin).
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