Macro Markets, hosted by crypto analyst Marcel Pechman, airs every Friday on the Cointelegraph Markets & Research YouTube channel and explains complex concepts in layman’s language, with a focus on the cause and effect of traditional financial events on daily crypto activity.
The risks of a US debt default is the first topic of this week’s program, penned by none other than Treasury Secretary Janet Yellen. Yellen warned of possible mass unemployment, defaults and widespread economic weakness if the US failed to pay its debts. This issue comes up every few years and creates some tension in Congress, but eventually they agree to raise the debt limit. So, no harm done, right?
That’s partly true, because when the government doesn’t have a majority, which happens to be the case, the opposition has the upper hand to negotiate their demands. In that case, Republicans want President Joe Biden to dump $4.5 trillion on unsound projects, such as canceling some of the student debt or hiring thousands of Internal Revenue Service employees.
Pechman explains how the event is bullish for Bitcoin (BTC) regardless of the outcome, discussing the likelihood of a sovereign debt default and how the debt ceiling hike is driving liquidity to markets and favoring tight assets.
The next segment of macro markets focuses on Tesla, the EV automaker controlled by Elon Musk. First, he addresses the importance for Bitcoin holders and the cryptocurrency sector, and then summarizes the financial conditions of the company and why the 9,200 BTC held by Tesla does not pose a risk to the price of Bitcoin.
The show concludes with an examination of how short selling works. Unlike futures contracts, in order to sell a stock at margin, you have to borrow it from a holder. Typically these rates are negligent, perhaps between 0.3% and 3% per year. However, if there is excessive betting against the stock price and demand for shorts increases, this rate can be as high as 50% per year or even unavailable at all.
In the case of the semi-failing First Republic Bank, which posted $100 billion in net redemptions in the previous quarter, short sellers are having trouble borrowing the shares, but Pechman says it’s for those interested in betting on the bank’s shares are interested, no problem represents price erosion. According to Marcel, the rescue of the First Republic bank can further catapult Bitcoin above $30,000.
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