As I write this, ES futures are up 0.62%, NQ is up 0.97%, and oil is down 2.43%.
It looks like some pressure is coming off markets as we see signs of de-escalation. This week, I find Iran’s president flying to New York for the UN General Assembly particularly encouraging. Yes, it’s a UN assembly, but what matters to me is where it’s taking place. Why would you fly into enemy territory in the middle of a war if you weren’t interested in ending it?
To me, it’s a clear signal of de-escalation, and the market seems to be reading it the same way. As I write, some pressure is also coming off the bond market, and things look in place for the next leg of the rally.
As I said last week, I’m still bullish on hyperscalers. They’ve been punished for something they probably shouldn’t have been. That said, I’m not going to repeat all the arguments. If you want to read them, you can go back to last week’s article.
This week, I want to talk about two things.
First, I’m not a crypto guy, but the reality is that crypto has become an established asset class with significant institutional participation. Bitcoin volumes spike during market hours and decline after the close.
Last week, a vote on the CLARITY Act failed by a single vote. The legislation aims to clarify how digital assets are classified as securities or digital commodities, and whether they fall under the SEC or the CFTC. I don’t think this vote necessarily stops it from becoming law. My expectation is that it passes in a subsequent round. That would reduce regulatory uncertainty around crypto assets, which could be particularly good for companies like Coinbase and Circle.
At the same time, the SEC announced a five-year exemption to facilitate tokenised stock trading. According to Reuters:
Eligible platforms and liquidity providers would get relief from certain registration requirements.
Tokens must preserve actual shareholder rights, including dividends and voting.
Companies must be notified before listing and can object.
In my view, this was huge. Coinbase, which could be one of the biggest beneficiaries, was up 11% on Friday.
I bought that rip.
The whole crypto industry had been left for dead for a while, and expectations are low. To me, that creates the conditions for an aggressive move higher.
The opportunity for Coinbase in tokenised assets is huge. The US is a trading nation, and I’m sure plenty of people with money inside the crypto and stablecoin ecosystem would like to trade stocks without leaving it. I think this opportunity is underrated, especially for Coinbase, and the market is sleeping on it. The stock could re-rate higher as the market starts pricing it in.
For those of you who prefer small caps, there’s also Securitize ($SECZ), which stands to benefit. It already ripped 21% on Friday. It’s a much smaller, more specialised company.
I went for Coinbase because I think scale works in its favour, giving it more ways to benefit from this. If tokenised stocks become available on Coinbase, I’d expect plenty of people to trade them there. Over the past few decades, we’ve seen how much distribution matters in business. And here, I think Coinbase has the advantage over $SECZ.
With pressure from oil easing, I expect a slow grind higher this week. While the UN meetings are taking place in New York, I think further attacks in the Middle East are less likely. That would give investors room to do what they do best: bid up stocks.
From here, I’m bullish on crypto, especially Coinbase, and on hyperscalers. I think semis will also get a bid, although I don’t want to touch them up here. I feel the market sniffed something out in June. But I think the rally can continue with or without semis, so I’d rather look for opportunities elsewhere.
Finally, I want to tell you about something I’m building. I like thematic investing, and I’m working on a tool to make it easier for me and all my subscribers. I don’t want to say too much until it’s ready for you, but I’m excited about it.
A like and restack would be appreciated. Thanks a lot.
Arctic