Oil-Demand Growth Is Over & $8 Million Lost Due to a Faulty Code #14

Market Meditations | September 14, 2020

Our Monday edition provides our scan of key weekly trading/investing events, we look into the potential end of oil demand growth and I take my first look at Polkadot.

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Today’s Meditations:

  1. Scan the Week

  2. Bitcoin, Ethereum and Polkadot Technical Analysis

  3. Defi Protocol Bzx Attacked Once Again, Lost $8 Million Due to a Faulty Code

  4. EU Finance Ministers Call for Restrictions on Stablecoin Issuers

  5. Blockchain Network Aelf Launches Sushiswap ‘Upgrade’ Called Sashimiswap, Already Has $315 Million in Liquidity

  6. BP Says the Era of Oil-Demand Growth Is Over

  7. UBS Chairman Studies Feasibility of Credit Suisse Deal

  8. Oracle Beats Microsoft to TikTok US Deal

  9. A Quarter of ETF Portfolios Could Be Actively Managed by 2023

  10. What’s the Worst That Could Happen?

Crypto News

  • Sept 14th: TrustSwap mainnet launch

  • Sept 15th. NEM testnest launch

  • Sept 15th. YFI Coinbase Pro listing

  • Sept 16th: Lamden mainnet launch

Global News

  • Sept 14th: ECB’s Lane speaks on the economic outlook

  • Sept 15th: UK average weekly earnings 

  • Sept 17th: BoJ monetary policy statement

  • Sept 18th: UK core retail sales


Three Day

$11200 – Key Resistance. While there’s no clear trend, as long as we can hold the 10400, level our bias remains bullish. As such it is important to note $11340 as the imminent resistance.

$11,000 – Key Psychological level.

$10400 – Turning Point. We covered in MM#12 that this is the first level we’re looking to claim to start shifting bias.

$9200 – Key Structural level. This 0.382 level remains key to our macro bullish bias.


Four Hour

$442 – Key Structural Level. It’s a long way away but this is the level we need to reclaim our strong bullish bias

$400 – Key Psychological Level.

$370 – Key Resistance. We have failed once to claim this level, should we fail again I expect the downtrend to continue to $316 at least

$316 – Danger Zone. Below here I expect the downtrend to continue. $250 becomes a reality


Four Hour

$6.14 – Key Structural level. Above here I expect an aggressive uptrend.

$5.50 – Key Resistance. Below this level a long would be extremely high risk, above this level we can enter on breakout or retest for far less risk.

$4.82 – Danger Zone. Invalidation point.

Note that this idea is hugely dependent on the performance of $ETH and $BTC.

  • Defi Protocol Bzx Attacked Once Again, Lost $8 Million Due to a Faulty Code. Decentralized finance lending protocol bZx was attacked yesterday and lost ~$8 million due to buggy code. Due to the faulty code, the attacker was able to increase their balance of interest-bearing tokens (iTokens) of bZx. The hacker managed to mint 219,200 LINK tokens, 4,503 ETH and around $3.8 worth of different stablecoins. bZx said that no users funds were at risk and the loss is being covered by its insurance fund. Read more.

  • EU Finance Ministers Call for Restrictions on Stablecoin Issuers. Finance ministers from Germany, France, Italy, Spain and the Netherlands have called to issue regulation for stablecoins and possible sanctions for issuers that do not comply. The ministers said that regulation was needed to protect consumers and to preserve state sovereignty in monetary policy. Last year, both French and German governments already said that they were opposed to private companies launching currencies that could challenge the euro, referring to Facebook’s Libra project at the time. According to Reuters, the European Commission is expected to present its regulatory proposals later this month. Read more.

  • Blockchain Network Aelf Launches Sushiswap ‘Upgrade’ Called Sashimiswap, Already Has $315 Million in Liquidity. Due to the open-source nature of crypto, competition has been fierce this year. After SushiSwap’s debacle last week, SashimiSwap promises to be an ‘upgraded and simplified’ version of the already cloned protocol. SashimiSwap is made by open-source blockchain project Aelf, a well-known project in the space. Like SushiSwap, liquidity providers will be able to earn SASHIMI tokens by staking their Uniswap liquidity provider (LP) tokens. Within a few days, already $315 million had been deposited on the protocol. Read more.

BP Says the Era of Oil-Demand Growth Is Over

Mixed bag for commodities: the gains seen in gold this year have hardly been matched by oil. In a recent Bloomberg article, BP Plc has said the relentless growth of old demand is over. 

Certainly this is not ‘new’ news; in previous Market Meditations we have discussed the decline in demand for oil and commodities traders will be aware that the prices actually took a turn to negative in the year (meaning traders were literally paying to have it taken off their hands). However, this is a significant story because BP is the first supermajor to actually come out and call the end of an era many thought would last another decade or more. Many of the major oil corporations have attempted to show resilience and relevance but it seems as though BP has decided to bite the bullet. 

Oil consumption may never return to levels seen before the coronavirus crisis took hold, BP said in a report on Monday. Even its most bullish scenario sees demand no better than “broadly flat” for the next two decades as the energy transition shifts the world away from fossil fuels. 

Time and time again, the corporate energy giants have described oil as the only commodity that can satisfy the demands of an increasing global population and expanding middle class. As such, BP is making a profound break from orthodoxy. 

The U.K. giant envisions a different future, where oil’s supremacy is challenged, and ultimately fades. That would explain why BP has taken the boldest steps so far among peers to align its business with the goals of the Paris climate accord. 

Just 6 months after taking the top job, Chief Executive Officer Bernard Looney said in August he’d shrink oil and gas output by 40% over the next decade and spend as much as $5 billion a year building one of the world’s largest renewable power businesses.

A shift to ‘cleaner’ business is not isolated to the energy industry. Indeed many global investors are making a similar move. ESG, previously a ‘nice bonus’ to an investment decision is becoming one of the key criteria in evaluating success. In fact, ESG has surged recently as investors search for better corporate citizens. As of July 30, ESG-themed ETFs had pulled in a record-setting $38bn in new money for the year and topped $100bn in total assets for the first time, according to the most recent available data from ETFGI. The pandemic has put the spotlight on the need to tackle ills such as climate change, income inequality and diversity.

  • UBS Chairman Studies Feasibility of Credit Suisse Deal. Breaking M&A news today as UBS Group AG Chairman Axel Weber has been studying the feasibility of a mega merger with rival Credit Suisse Group AG as part of a regular thought-exercise on future strategic options, according to people familiar with the matter. UBS, the world’s largest wealth manager, has been exploring the question with consultants but it hasn’t raised the topic at the level of the executive board, the people said. The assessment is part of regular internal planning procedures and there are currently no formal discussions going on between the two banks, said the people, who asked for anonymity because the information isn’t public. Both banks declined to comment. Speculation about a deal was stoked earlier Monday, when Swiss finance blog Inside Paradeplatz wrote that Weber and Credit Suisse Chairman Urs Rohner could agree on a merger as early as next year. Read more.

  • Oracle Beats Microsoft to TikTok US Deal. ByteDance has reached a preliminary ‘technical partnership’ agreement with Oracle for TikTok’s US operations that does not include a full sale of the short video app (FT reports), according to three people with knowledge of the matter. As part of the deal, Oracle plans to address the national security concerns that Donal Trump’s administration has raised over the Chinese company’s ownership of TikTok, said one of the people. The US technology group chaired by Larry Ellison, one of the few people in Silicon Valley who has publicly supported US president Donald Trump, is likely to own a minority stake in the US business. Existing ByteDance investors are also expected to have a stake in the final deal, who added that the talks are continuing and could change. Any deal would require the support of the US and Chinese governments. Read more.

  • A Quarter of ETF Portfolios Could Be Actively Managed by 2023. U.S. investors expect actively managed ETFs to skyrocket in popularity in the next few years, surging to more than a quarter of client allocations by 2023. Money managers in the world’s largest exchange-traded fund market predict the share of active products in ETF portfolios will rise to 26%, up from 19% today, according to a survey by JPMorgan Asset Management. American respondents are more bullish on the funds than their counterparts in other regions. In Asia-Pacific, predictions are that active products will make up just 4% of allocations, while in EMEA, the figure is 21%. One thing they all agree on: Passive funds will face increasing competition from both active and smart-beta strategies. The share of index-tracking ETFs globally will shrink to 61% of portfolios by 2023 from the current 69%, respondents to the survey predict. Read more

What’s the Worst That Could Happen?

Very few decisions we make in our day to day lives are irreversible, although we don’t always perceive it that way.  The fear of the unknown paralyzing us is something we’ve all encountered in our lives. Thinking about what might happen is not something that should hold as back as life is rarely about certainties. Waiting to take action until you’re 100% certain about the outcome inevitably comes with a big opportunity cost.

Everybody makes checklists about their personal and professional goals, but what if we turn this around and write down our fears instead of goals? The Stoics were fond of preparing for the worst-case scenarios and successful entrepreneur Tim Ferriss developed an exercise which he describes as the most important exercise he does every month. He describes fear setting as “an operating system for thriving in a high stress environment. An exercise to visualize the bad scenarios that could happen, so you’re less afraid of taking action.”

In his book Tools of Titans, Ferriss provides a few questions to think about your fears. Simply thinking about them isn’t as effective, spend a few minutes actually writing down your answers:

  • Define your nightmare, the absolute worst that could happen if you did what you are considering.

  • What steps could you take to repair the damage or get things back on the upswing? How could you get things back under control?

  • What are outcomes or benefits, both temporary and permanent, of more probable scenarios? How likely is it that you could produce at least a moderately good outcome?

  • What are you putting off out of fear? Usually, what we fear most doing is what we most need to do. 

  • What’s the opportunity cost, financially, emotionally and physically, to postpone action? Don’t only evaluate potential downside, but also the costs of inaction.

  • What are you actually waiting for? Good timing is generally not a good answer.

Going through an exercise like this makes you realize that potential downside is limited, with potentially life-changing upside. Even if things don’t work out, we often can pick up where we left with a little bit of effort. Don’t let the fear of the unknown paralyze you, write down your fears and take action today. As Seneca once said: “While we are postponing, life speeds by”.