😧 More Trouble Ahead?

What’s on the Menu 🍴

The bitcoin halving and earnings season has sent markets scrambling to find their footing.

And this week we’ve got even more potential fireworks to watch!

Let’s dig into it:

• What to Watch This Week 👀

• More Trouble Ahead For Tesla? 🚘

•  Bitcoin Halving Ignites Fee Surge ₿

Today’s newsletter is a 4 minute read.

What to Watch This Week 👀

Fear finally set in among investors last week, leading to a meaningful 3-5% selloff in major stock indices.

Tech and AI themed stocks were down heavily, including Nvidia, which sold off 10% on Friday alone.

Reactions to earnings reports have been weak thus far, with Netflix, TSMC, and JP Morgan declining despite solid financial results.

This week will be an opportunity to either turn that around or confirm the bearish trajectory, as more than 60% of the S&P 500 will be reporting Q1 earnings this week:

The Bitcoin halving event passed late last week, and crypto prices improved modestly.

Post-halving price action was strong in the previous cycle, so investors will be watching closely for signs of a crypto resurgence.

Headwinds from rising yields and geopolitical uncertainty remain a concern however.

Although earnings will be the key focus this week, the macro calendar has some data releases worth tracking:

• Germany manufacturing PMI (Tues)

• Australia inflation (Tues)

• US new home sales (Tues)

• US durable goods orders (Wed)

• Germany consumer confidence (Thurs)

• US Q1 GDP estimate (Thurs)

• Bank of Japan rate decision (Thurs)

• US personal income & spending + PCE (Friday)

Four of the five worst performing S&P 500 stocks year-to-date (Tesla, Boeing, Intel, & Charter) will report earnings this week. Expect some fireworks!

We’ll also be keeping an eye on the following assets & sectors:

📈 Rising Recently:

• Gold (GLD)

• Silver (SLV)

• Utilities (XLU)

• Consumer Staples (XLP)

• Airlines (JETS)

• Crypto (BTC / ETH / WGMI)

📉 Falling Recently:

• Semis (SOXX)

• Software & Internet (IGV)

• Bonds (TLT / IEF)

• Real Estate (XLRE)

• Homebuilders (XHB)

• Small Caps (IWM)

• Solar (TAN)

• Biotech (XBI)

• Momentum (MTUM)

More Trouble Ahead For Tesla? 🚘

Tesla has been in hot water as the worst performing stock in the magnificent 7 year-to-date.

It’s down -40% year-to-date, and -64% from its all-time-high.

Between disappointing deliveries and production, lowering prices, disappearing revenue growth and competition, it’s feeling harder for Tesla.

Things may just be getting worse as they’re having to recall a number of Cybertrucks due to faulty pedal function (only the most important part of the vehicle).

A TikTok video of a Cybertruck owner went viral after telling his story of his pedal getting stuck.

Although recalls are extremely common in the auto industry, and this is a small amount of vehicles in the grand scheme of things, it’s not helping the sentiment on the stock.

Investors are already feeling the bearish vibes, and this could lead to an acceleration of the already weak price action.

Without a doubt, their auto sales are still the bulk of their revenue. The auto segment is 85% of their total revenue.

So, slow or no growth here could really pose a problem for the company’s valuation.

It’s hard to say for sure at what level dip buyers will get excited about Tesla again, and selloffs can get more violent going forward.

-50% to -70% corrections in Tesla have been no stranger to the stock. So, there’s more room for valuation compression if things don’t turn around on the growth front.

The flip side to this could be investors buying the stock simply for how ahead they are on self-driving technology and the future prospects of a robo-taxi business.

Maybe they ignore the weakness in the auto business.

The full self driving is certainly something that creates an “option” built into the stock. Investing more for future innovation Cathie Wood style.

However, for now, it seems like investors may be choosing to care more about how Tesla is fitting into its fundamental valuation based on what’s happening today.

Eventually, Tesla could get to a valuation that could make a lot of sense, but for now we will wait and see how this support breakdown plays out and watch for more of a deal.

 Bitcoin Halving Ignites Fee Surge ₿

Last week bitcoin had its 4th block reward halving.

For the next 4 years, 3.125 bitcoins will be mined about every 10 minutes.

Out of the 21 million bitcoins to ever exist, over 19.6 million have already been mined.

This means there is only about 1.4 million bitcoins left to be mined.

After the halving, we saw transaction fees skyrocket…

And the money miners made from transaction fees in one day was three times higher than ever before, reaching over $80 million.

Also, for over 100 blocks, the money miners made from these fees was more than the money they made from creating new Bitcoin.

Normally, miners get new Bitcoin as a reward for their work, but if they make more from fees, it's like a bonus for them.

However, there are good things and bad things about this situation.

Pros of High Fees:

1. Better Security: When miners make more money, they have a bigger incentive to keep the Bitcoin network safe.

2. Miner Revenue: It's good for miners because they earn more, which can help them keep their operations running.

3. Priority Processing: People are willing to pay more to have their transactions processed faster.

Cons of High Fees:

1. Costly Transactions: Sending Bitcoin becomes expensive, so it's not as cheap for small transactions, like buying a cup of coffee.

2. Less Accessibility: Higher fees might push out people who can't afford them, making Bitcoin less accessible to everyone.

3. Network Congestion: If fees are high, it might mean the network is too busy, which can slow down transactions.

In short, high fees are good for the miners because they make more money, but not so great for people sending small amounts of Bitcoin because it becomes more expensive for them.

It's a bit like if it suddenly cost a lot more to send letters in the mail; great for the post office, not so great for those sending the letters.

Food For Thought 🧠

“Markets are never wrong, but opinions often are.”
- Jesse Livermore

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.