The Cointelegraph Markets & Research YouTube channel hosts the Macro Markets show every Friday. Led by crypto analyst Marcel Pechman, the show explains complex concepts in easy-to-understand terms and looks at how traditional financial events impact day-to-day crypto activity.
At the start of the latest episode, Pechman explores why the crypto market capitalization is 60% lower than its all-time high, while the S&P 500 is just 15% away from its peak. He explains that the sector is facing a major issue because it doesn’t fit into either the commodity or foreign exchange currency category, and not every mutual fund can hold crypto. One should not expect to find theories to explain why crypto is unable to reach new highs.
Pechman then dives into the NVidia $2.3 billion short seller losses. He notes that a short seller can bear the pain if they don’t close the borrowing, so as long as they have enough collateral deposits, they still incur losses. An investor who paid a higher price for their crypto is in the same boat, but they need to find someone willing to lend those shares to keep the trade open.
The Bloomberg article mentions that NVidia is the fourth-most shorted stock in the U.S., behind Apple, Tesla and Microsoft. According to Pechman, the top four most shorted stocks are also top 10 S&P 500 components, which may suggest that the short sellers have been market neutral all along.
The show also addresses China’s 5% growth, which has disappointed investors, and its implications for the markets. Pechman emphasizes that China’s reluctance to issue new stimulus packages is the most significant news as it could be a strategy to further weaken other global economies. He also points out that Germany has already entered a technical recession and the U.S. is likely to follow suit.
The outcome for crypto is initially negative, as it drains liquidity from markets and investors turn to short-term government bonds and cash. However, if the U.S. dollar loses strength, that could be positive for crypto in the medium term.
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