Fireside with SOULLY: Educational series episode 8 — Macroeconomics and it’s impact on crypto markets

23 min readJul 14, 2022


Intro slide

Welcome to the weekly minutes from this week’s fireside chat. The full video of this transcription can be found via the following link:

However, to ensure our non native English speakers are kept informed, we have provided this transcription for translation purposes.

Given this topic was an open discussion, the format will be slightly different from last week. Rather than a revision of speaker notes from the presentation, this week’s format will be a condensed version of the discussion that took place between FTM D3gEn and Crypto Clay on the subject of macroeconomics and its impact on crypto markets.

As always, this information is for educational purposes only and presented in order to objectively impart value to our community. Neither of the speakers are registered financial advisors, as such the content of this transcription is not to be taken as financial advice. These speakers are simply sharing their thoughts and opinions at the time of the discussion.


~ JJBe Good: Welcome welcome everyone, this week’s fireside will be slightly different, This week we have Crypto Clay from FTM Alerts with us. Before starting the show, I would just like to thank the full team at FTM Alerts for the fantastic job they do for the wider community.

Without further ado, I will leave the floor to FTM D3gEn.

~ FTM D3gEn: Thank you for the introduction JJ. Good evening folks and welcome back to another Fireside with SOULLY, thank you for joining us.

Tonight we have a very special cameo appearance, a gentleman whom I'm sure many of the community members are familiar with, none other than the man the myth the legend, CRYPTO CLAY !

As JJ has alluded to, Clay is well known as a bastion of knowledge on the subject of macroeconomics , so we had to get him on this evening. Before we get into tonight’s topics, Clay could you give us a bit of insight about your background.

Crypto Clay

~ Crypto Clay: Sure man it would be a pleasure. So I'm Clay from FTM Alerts, got into crypto around 2017, my dad actually read silk road, he’s actually more of a crypto fiend than I am. So I got in then. Managed to ride out the 2018–19 bear market. I kind of regret that I lost a little interest over this time, but here we all are, back at it again and I’m just really excited that we are applying macroeconomics to our strategies now, advancing our perspectives, the emergence of DeFi 2.0 is really changing the environment.

So I actually come from a media background having worked at Nickelodeon, Yahoo & NBC , I ran sales teams for programmatic advertising for a long time.

I actually got into FTM Alerts by my connection with Austin’s brother, we were friends in college and Austin was obviously heavy into crypto, and one day we linked up, had a discussion about FTM Alerts he invited me to come along and join him for a discussion one day, there was instant synergy and the rest is history.

~ FTM D3gEn: Wow man what an amazing story, thanks so much for the overview. To echo what JJ just said, you guys are doing an amazing job on FTM Alerts.

Right Ladies and gentlemen, without any further ado, let’s push on with things.


Just before we do, an obligatory NFT from me.

THe purpose of this Fireside event is to have an engaged discussion

We are not registered financial advisors and NONE OF THIS IS TO BE TAKEN AS FINANCIAL ADVICE

With the obligatory NFA out of the way, lets tuck in !!

Slide 1

~ FTM D3gEn: First topic of the evening is Why are we here today & What are our goals as investors and traders?

Before I let you have at it Clay, I just want to front run my personal thoughts here.

1. I’m here to give as much value as possible to the SpiritSwap community. Whether the market is up or down, I’d like to impart as much value and knowledge as I possibly can to allow our community to make informed decisions, not just surrounding the governance but in their decision making process throughout their daily trading activities. By this I mean, not tell you what to do with your money, but more so provide you with the “thinking tools” that could be handy, to allow for better thought process when making these decisions for yourself.

As for investor goals, I mean, we all have a common goal and that is to make money, I mean no one enters the arena with the goal to lose, unless your dumping 200 million worth of tokens on the open market with a covered 100X leerages short positions (hahahaha) I digress, jokes aside, people invest for many reasons, be it short term or long, but the ultimate goal is to improve ones prospects in life from a financial perspective.

Personally, My financial goals fall into several categories that are rooted at one base, financial security for my wife and evermore my daughter, but also to improve my life quality, not haing to slave away at a 8–5, allowing myself ot have more time with my family and friends, but ultimately build an empire for my queen, my 3 year old daughter.

~ Crypto Clay: Yeah, I mean there’s a lot to cover here that I’m going to keep this super short so we can push on with the more juicy topics.

My perspective is, we’re here to make money, like all of the things you said about supporting yourself and your family, I mean that’s why we’re all here.

Another reason why we’re here, is to hopefully understand some of the key metrics that we really need to start paying more attention to so we can effectively make that money, ultimately its to become more intelligent investors. If we can accomplish some of that here today then I think we have done our job.

~ FTM D3gEn: Awesome Clay, thanks so much for your perspectives there.

Slide 2

~ FTM D3gEn: So, yeah the current state of Macro affairs. So my take real quick is we have several main factors followed by micro factors that are either symptomatic of these macro factors or a cause of them.

- The US has printed more of its money supply over several years than it has in its entire existence The ECB, JCB, BOE, etcetera are all in a similar boat, drifting down shits creek without a paddle, emphasis on lack of paddle

- We’re coming out of what’s been referred to as a global pandemic, I try not to get too political about things, but in short this inflation could be argued as a symptom of the pandemic

- We now have Russia arching up on Europe causing supply chain issues which is in a sense adding fuel to the current global economic dumpster fire we find ourselves gazing at slack jawed

- All of which are causes of the DXY skyrocketing currently at the highest point its been in 20 years.

~ Crypto Clay: Clay conforms, 20 years

~ FTM D3gEn: Yeah, I think 2000 was the last we saw it at where it is currently (107)

~ Crypto Clay: (Clay corrects D3gEn) 2002

~ FTM D3gEn: 2002 there you go. So now that i’ve had my rant to set you up, please oblige and as they say, knock em down, give us your take on the current state of macro affairs.

~ Crypto Clay: Yeah, so apologies in advance, I have a lot to say here. FYI my perspective is predominantly US based, however the global economy is suffering the same symptoms, so it’s kind of relative.

Let’s run through what we are seeing.

- So the latest CPI print was 8.6 % (so inflation is out of control)

- Mortgage rates are now 5.6% (doubled in the last 2 months)

- The FED has done a 50 basis point hike a 70 basis point hike & all signs point to July being another 70 points (for context, this is the first 70 BP hike in 30 years)
- The 10 year treasury yields are moving higher, the yield curve just inverted vs the two year (which we will cover shortly)

Really all of this is resulting in the fund rate, (the rate at which that banks charge each other for overnight loans needed to maintain their reserve requirements) is rising, its now 1.75 % for context a year ago it was only 0.25%, so the banks fund rate to operate is higher, there now squeezing the loan market as they are making less money thus having an impact on everything we do.


- Tec stocks are down 40% which happened in the blink of an eye

- Second worst start to the equities market in the last 50 years

- Q1 GDP for the US was — 1.6 % and based on estimates that were finalized two days ago they’re expecting another -2% for Q2. For context two quarters in a row for GDP loss basically means a recession is coming.

So these are the factors that we have in the head wind against us to warm things up for this chat. Anything you want to add ?

~ FTM D3gEn: Firstly amazing take, appreciate all of those clay figures. As per one of the main points you touched on, this is the perfect segue into the next topic, being inflation.

Slide 3

~ FTM D3gEn: I'm sure many of our community members are familiar with this term, but Clay, in your own words, would you mind giving us a rundown on inflation, possibly define it and perhaps give us your perspective on whether fed tools are effective at this point and time.

~ Crypto Clay: Absolutely, I would love to. Before doing that I would like to back up a little bit just to add some context.

- Bond market sees recession coming

- Stock market sees a recession coming

- The crude market sees one coming & likely the housing market is next up

The questions we need to ask ourselves are, How or why didn’t we as the crypto community see a recession coming, what can we learn from this ?

We at unchained, have started to understand that the macro global perspective is massively overlooked in this space.

If you look at the trends, right, there’s always warning signs on the way that things might get ugly and my take on it is that we get so lost on these macro things in the crypto bubble that we really overlooked those warning signs this time around, but now that there is so much institutional money around, which there wasn’t as much in the past, we have to start paying attention to all of that. That’s my soapbox on how we missed all of these warning signs and why we have to pay attention to macros. So if we have everyone walk away with 3 things that they’re like “Oh shit, you know what, I won’t miss that next time, then I think we have done our job today”.

So background aside and on to the inflation talk, looking at inflation, so let’s define the CPI before we dive in.

The CPI represents changes in all goods and services purchased from inception by urban households, so how much more expensive groceries are, (used ham price difference over a year as an example) so let’s break down some of the data points that are kind of within that and to your point D3gEn, does the fed have the tools that they really need to work to combat this inflation.

So I mentioned the ham before right, so food is pretty much inelastic, people have to eat right ? The war in Ukraine is driving food prices higher. Oil prices are going through the roof because transport is a nightmare right now with the supply chain issues, and actually I have a friend that works for a tire company, which is a pretty well known company, he told me that dealing with the shipping container companies globally right now is among the highest price quotes that he has ever seen regardless of what you’re trying to ship, so you’ve got a three factor problem on your hands. The bottom line is federal hikes are not going to fix the wheat crop, right? It’s not going to change the war in Ukraine & the supply crunch we’re seeing on food is a major problem and it doesn’t seemingly doesn’t get better without some macroeconomic changes particularly around the war. Then the other piece probably you know within inflation that we should look at I think is energy, right now I think it actually just came down yesterday it was about 115 dollars a barrel for crude unrefined it came down to about 105. The bottom line is the world is buying oil from Russia, which is insane. The green policies worldwide have have really stopped the production domestically and the global production of oil.

These rate hikes from the fed they’re not going to fix oil prices and they’re not going to force china to reopen their ports or fix the supply chain and so I think as far as cpi goes i’m not sure that the fed’s tools in terms of interest rates are going to be you know super effective against these factors contributing to inflation.

~ FTM D3gEn: I mean I tend to agree, I’m reminded of a meme I saw on twitter the other day. To sum it up, you had you had the german parliament laughing at Trump sort of saying you know you guys are way too reliant on Russia for their oil and energy, this is going to crush you ultimately, at the time they took it as a massive joke but I mean that joke’s not aging very well at this point in time, You look at the consumer price index for energy in Germany, why i’m referring to germany I here is because they essentially are the backbone of the EU, I mean personally I don’t expect to see the euro lasting the next 10 to 20 years. Ultimately at the end of the day majority of the of the global currencies or major global currencies are oriented around the US dollar (hence the DXY, which we’ll get to later). I mean you saw the euro fall by two cents against the USD yesterday, the pound also. What i’m trying to say here is there is a roll on effect based on US federal policy in a direct or indirect manner. I mean, lets touch on that real quickly, what do we have coming up this month? There’s the CPI print on the 13th of July, ?

~ Crypto Clay: Correct FOMC basis points on the 16th I believe and then the gdp release is on the 30th

~ FTM D3gEn: Yeah so I mean from a cumulative macro perspective I hate to be the bearer of bad news here but it is it is kind of looking a little bit doom and gloom at the moment.

When you look at what European central banks have been doing, essentially just LARPING around all of this, as far as i’m concerned there’s a lot of posturing going on, but nothing really

happening that shows that people are taking this seriously along with our friend JP who is, I guess, is taking more of a hawkish stance at the moment in comparison with the EU but at the end of the day the proof is in the pudding. You can clearly see looking at projected cpi prints and where cpi prints have been in the past few months . . . it’s not really working at the stage but then again you know these things do take time to kick in.

~ Crypto Clay: Bottom line is if the fed’s tools for rate hikes because of the macro global factors cannot rein in inflation quickly, which it doesn’t seem they’ll be able to, because they can’t fix the wheat crop they can’t affect oil prices they’re not going to affect ports, etc then we have a 6,12,18 month recovery on our hands and it’s just good to be realistic about things.

~ FTM D3gEn: Exactly, well summarized. Ok so we’re chewing up time here so let’s carry on. So the core inflation and real policy interest rate percentage do you want to give us your perspectives and insight into this.

Slide 4

~ Crypto Clay: Perfect yeah so I just really wanted to use this picture as an illustration to how bad the inflation situation really is. So core inflation is the cpi (less food and energy), is just another way to look at cpi with a little bit different metric, but if you look way to the right (on this chart) basically you know the real policy interest rate is the fed’s fund rate so, for the longest time that was zero right minus the core inflation rate for the previous 12 months , for the longest time I can remember, that was zero, right, minus the core inflation rate for the previous 12 months so if you you were to look at January 2022 the the real interest rate was was zero and and inflation about six percent so we’ve got a minus six percent interest rate effectively. When we look back through history, the last time that we saw anything like this was 1975. You can see that it was a 17% gap back then and right now we’re at a 12%. This is a good forecast as to how brutal the situation really is and why the FED is so hawkish, this is a great visual representation! I wasn’t alive but between 75–83, but to reduce inflation to 4%, the FED had to raise 1300 basis points, over this time unemployment rose by 600 basis points, which we will talk about in a little bit. I don’t think that’s going to happen here as we’re in a completely different time from the energy crisis of the late 70s early 80s but what I am saying is we have a huge uphill battle from here and I think this graphic is a good way to showcase it.

~ FTM D3gEn: Absolutely and so those points are a great sort of intro to the next topic, being the importance of bond markets and interest rates, so Clay perhaps give us an overview on why bond markets matter ?

Slide 5

~ Crypto Clay: So the purpose of government bonds is to raise money, operate the government & to pay down debt. Just so you guys have some context here I'm really going to focus on 10-year yields they’re called notes, 10-year yields traditionally influence mortgages and interest rates. We’ll also focus on two-year yields which are influenced by fed rate hikes so short duration yield and a 10-year bond just so you have some context but there’s really not many things that are a better economic indicator than the bond market.

So let’s lay out some components of bonds and how they are tied to the FED. So there’s 3 core components. To a bond :

Maturity date: Focusing on 2 and 10 year bonds
Face value: What it’s worth when its created
Interest rate: Otherwise known as coupon rate which is the fixed amount the bond pays each year up to its maturity rate.

So if you have a 10-year treasury note for a thousand dollars at a four percent interest rate, every year that investor is going to receive 40 bucks in the return of principal and eventually the thousand dollars back in return from principle. That’s how the 10 year notes work.

Bond price and bond yields are inversely related, bond prices go up, yield goes down, vice versa. This is important for later.

So FED have been printing money like crazy due to covid, they also relaunched a bond buying program to the tune of 120 billion dollars of bonds bought each month between treasury and mortgage-backed securities, in short the FED were trying to stimulate the economy their printing money and pumping the bond market at the same time.

Because of the inverse relationship between bond face and yields, bond prices fell to record lows, to increase record spending, previously issued bonds or existing bond prices went up and this was good for the bond market so, this was a great time for bond investors. Fast forward to 2021 we have war, energy issues and rate hikes, this became a pretty key problem for bond investors moving forward. When short-term interest rates rise, yields go up with it and the issue is when yields rise the previously issued bond prices fall. So if we go back to our our four percent bond example, for that four percent bond, if the yield later goes up to five percent for that same ten-year note basically that reduces the price of the existing bond (the four percent bond that was issued a lower interest rate) as a function of supply and demand, that bond is no longer profitable basically that bond becomes a losing money scenario

To tie this in, where we are at today, from 2021 to 2022. The benchmark 10-year US treasury note yielded 1.5 percent at the end of 2021 by may 2022 the yield topped 3 percent. This was a negative for investors due to the inverse relationship I spoke of earlier. Bond market went sideways, because of this the bond market was flashing recession warning signs at us, we just didn’t pay attention.

~ FTM D3gEn: So for crypto investors, the smoke detector was ringing, but we were too busy aping into shitcoins. So while we’re on the topic of yields, to keep with the time duration, this is again a good segue into the next topic. Another interesting chart that you have been referring to in the previous slide here is the inverted yield chart, sorry, I think I was a bit slow on the slide shift here and I think there were overlapping topics so i’m going to throw this up real quick. So as you were saying, at a high level, Many economists say an inverted yield curve signals an economic downturn is coming. Essentially an inverted yield curve occurs when short-term Treasury yields exceed long-term yields.

Slide 6

~ Crypto Clay: So basically the yield curve impacts when you, when you lend money to the federal government, this is what happens on the treasury notes. In a normal duration, 10 year yields are going to be higher than a shorter duration bond (the 2 year for example). If you are loaning out money for a ten year bond you are taking a bigger risk by letting the government hold your money for a longer period of time, you expect higher yields.
Effectively the yield the yield curve in itself is the spread between the bank’s cost of money versus what it’s going to make by lending out that money, when it flips basically and the economy is doing poorly, people take money you know out of stocks and they put them into out of risk assets such as long-term bonds so that higher demand causes the price of the bonds to sink that pushes down the yield curve. So when 2 year yields are higher than 10 year yields, this is a massive warning sign, why would people want to buy longer term bonds in this scenario?

This flip happened on March 31st this year. The irony here, or maybe not, is this was on the same day that BTC hit its third rejection off the 200-day SMA at around 48 000 bucks which is when we started this current Bitcoin decline.

~ FTM D3gEn: Amazing rundown of bonds and inverted yield impacting crypto, thanks for your insight there Clay. So pushing on with our next topic, I always love hearing you talk about that on unchained and to be frank I hadn’t paid much attention to it prior to actually ringing that alarm bell so to speak, so let’s shift context into the next topic, what is the DXY and how does it correlate with Bitcoin? Let’s dive into this a little.

Slide 7

~ Crypto Clay: Yeah sure so the dixie is basically an index value of the us dollar relative to a basket of foreign currencies so the measure of the dixie is it’s

57 against the Euro
13.6 against the Yen

11 against the great British pound

4.2 percent against the Swedish korma and then a little bit against the

The rest against the Swiss franc

Really it’s an indicator that it’s a warning sign that money is moving into safe haven assets or risk-off environments. Traditionally had an inverse correlation to positive Bitcoin price movements. We had an indicator on Feb 11 when it was announced that Russia could invade Ukraine, that was a warning sign, no one paid attention. Over this period, the DXY moved from 95 to 99.2 (+4%) in about a month.

~ FTM D3gEn: That’s a huge shift in the space of a month !

~ Crypto Clay: Yeah, it is. So at this point stocks began to risk off and capital you know began to flow into the dollar. So with the DXY creeping higher, we have to assume more money is flowing into risk off assets thus why must assume this is a warning sign.

~ FTM D3gEn: Perfect, thank you Clay so let’s push on with one of our last topics for the evening, I don’t want to take up much more of your precious time, so lets tee up this wind down with the big question Clay, what do you see as coming next ? I watched the Alerts show earlier and I heard you talking about the Phillips curve which is basically an inverse

relationship between employment and inflation, what’s your outlook on this and perhaps with my poignant take on the forecast and what you’re probably going to say here, with earning potential declining not only in the job sector but also the investment space, what would you consider a good thought process when conducting an EPS revision?

Slide 8

~ Crypto Clay: So interesting you should ask this I mean, Microsoft just just uh just did an earning per share revision and I think there’s there’s two factors here so you know

1) I am a believer in the Phillips curve. I do think that we’re going to have to see an increase in unemployment before things get better. I think I gave on the FTM Alerts show a couple examples but the main one being that . . . Cut off by D3gEn

~ FTM D3gEn: Yeah thats right they came out with some very staunch unwinding of employment and so did Coinbase, basically informing their employees of their redundancy

via an email to their personal address because their actual company

addresses had already been revoked, so I mean erring on what I heard Nick D discussing on Alerts, and the overflow impact into valuations here, you know, I’m stealing this from Nick D here by the way, these aren’t my original thoughts but I do agree with them, he said it very well. . . A lot of the valuations on these companies have been based on growth projections. Essentially a lot of these employees weren’t necessarily needed but you know, during the growth phase/ RnD and all of that, if your competitors are hiring you need to hire in order to stay agile

A good friend of mine who works in Microsoft has just said that he’s been pivoting / context switched between three different main projects over the last couple of months which is

quite huge and that’s purely because the human resources aren’t there, so now they’re kind of pivoting to sort of try and stay ahead on what’s relative / what’s relevant to what the competition are doing. So I guess the overflow effect here is with all of these major tech companies being priced in based on a growth projection scale and with wind down of employment happening and inhibiting how agile R&D can be, those valuations are going to fall off a cliff edge, I’m ranting, please carry on Clay, I’m sorry !

~ Crypto Clay: No no no, you said it perfectly, and further to this, I think we’re going to see some crazy shake outs in a variety of sectors (gives example of his buddy working in finance).

The biggest takeaway is this is not a v-shaped recovery, We’re still feeling the effects of march 2020 bailouts a ton of companies should have folded back then, they didn’t, so that debt is still on the books of lenders and the central banks I think have got rough times ahead but there there is good news in my opinion as well more longer longer term. ( interrupted by D3gEn)

~ FTM D3gEn: Which is a good place to wrap this up, I’m surprised we have managed to squeeze this into an hour but, do you have any good news for us Clay, let’s let’s wrap this up on a positive note, what’s your sort of what’s your outlook over the next say 12 to 24 ? Where do you see things heading ?

Slide 9

~ Crypto Clay: Absolutely, I think a few key takeaways are to learn from what we have missed. The events of the bond market need to be followed more closely. The warning signs of the bond market are huge so are following the warning signs of the DXY.

So on to the good news so in my opinion, btc price price action has actually been pretty strong relative to the DAY strength right ? We had a I think we had a four percent jump in Bitcoin today so it seems like there’s only so many sellers in this market at the current prices and find that to be encouraging. Also as we see the old world tightening you know JPM still wants crypto to be bigger than real estate, so if lending is really no longer there as a profitable and viable business option form them, where is the opportunity at that point, right? And I think it’s Bitcoin and Ethereum, so I think we likely see a shift to a digital asset ecosystem. I’m not saying it’s going to be tomorrow but this could be on the horizon, what about you ?

~ FTM D3gEn: Well if we look at the rapid incline of crypto during the covid aera, it was the perfect storm of helicopter money flowing into peoples bank accounts, expenses being less as we had less options to spend this money, more time on our hands, you know the perfect environment for people to investigate and invest into crypto and so I see this decline that you have just described here as possibly creating the perfect storm for not a drastic shift to take place, like it’s going to take time, but at least to create an environment for that shift to truly commence.

As you Said equity has to flow somewhere and I feel like this definitely isn’t the end of crypto, we’ve been through these market cycles before and by paying attention to these key indicators and having a sharper mindset as to which indicators you’re actually looking at, taking learnings from your previous mistakes & taking learnings from the markets mistakes for example (don’t over leverage, look for opportunities not by mindlessly aping but by doing a bit of research and looking into fundamentals a bit more), if we take this time during the down turn to sharpen your teeth a little & get smarter so you’re better equipped for when the bull eventually raises its horns once again, there’s a perfect catalyst for this shift to happen so to speak.

~ Crypto Clay: Yeah so a couple couple things I want to add to what you said, so

I think something we really have working in our favor is the crypto markets can handle volatility like, if you look at traditional markets like they’re not reflexive. If the FED continues down this path forever traditional markets are going to crumble. Whereas if you look at Bitcoin we’ve had like seven drawdowns of like 70 or more in its life cycle so I think we have to keep in mind how things have worked traditionally.

I’m also encouraged that VC’s are still out there and they still seem hungry I mean, Fantom just

got a 15 million dollar cash infusion from a VC recently and I think this could be perceived as an indicator that we are in a really reflexive market that I think can handle this kind of volatility, I think there’s still a lot of positives.

~ FTM D3gEn: Amazing Clay, thanks so much for that positive conclusion.

Well folks, we are on the hour so I will wrap this up now, Clay, thanks so much for your time, it was an absolute pleasure having you with us today as always. A special thank you to the community for turning up, make sure to like, subscribe and share if you’re watching this on Youtube and i’ll catch you all next week for another Fireside with SOULLY.

Cheers and good evening!

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