Today’s edition is brought to you by Own - the project that’s partnered with Arbitrum and has announced a special giveaway.
Head to Own’s discord for the special giveaway 👀
GM. This is Milk Road. We're like your favorite pair of sweatpants – something you look forward to getting into on a daily basis!
Here’s what we got for you today:
- ✍️ This chart calls recessions
- ✍️ Investing in Base startups just got easier
- 🎙️ The Milk Road Show: The Crypto Playbook No One Is Talking About w/ Santiago Santos
- 🍪 Three massive countries are using crypto for trade payments
Prices as of 2:00 PM ET. Click here for our Fear & Greed Index.
HOW TO PREDICT A RECESSION USING A SINGLE CHART 📉
Get out your pocket protectors and put on your 20x magnification glasses…
‘Cause we’re about to get nerdy.
Today, we’re talking about credit spreads and how they can be used to predict a recession.
Now, don’t worry! We’re going to make this as simple as humanly possible – imagine I’m Margot Robbie in The Big Sh—I’m kidding! I wouldn’t do that to you two days in a row.
Instead, I’m going to break it down into three parts…
1/ How credit spreads work
A 10-year treasury bond (aka: super safe government debt) might yield 3%, while a 10-year corporate bond (aka: riskier corporate debt) might yield 5%.
The credit spread here is 5% - 3% = 2%.
And the spread reflects the extra compensation investors need in order to stomach the risk of corporate borrowers defaulting on their loans (compared to the virtually risk-free government debt).
The riskier American corporations become to lend to → the ‘wider’ the spread becomes.
2/ How credit spreads can predict recessions
So we’re in an economic downturn right now…stocks and crypto are tanking…which means credit spreads should be sounding the alarm bell and widening – right?
Not necessarily.
The stock market can be supported/suppressed by all sorts of factors that help to mask things – think: momentum, narratives, central banks pumping cash into the economy, etc.
Credit markets are affected by solvency and cash flow – core economic realities that are much harder to fake/hide.
(Aka: credit markets are your blunt friend with no filter. Equities are your dramatic friend that often overstates the ‘good’ and the ‘bad’.)
Because they have less of a filter, credit markets are often a much better measure of ‘recession risk’ – with spreads often widening ahead of, or in line with a market meltdown (not after). 👇
Which means if stocks are dumping, while credit spreads are relatively stable – it could just be a case of the stock market over-reacting to bad news, slowing momentum, and financial policy.
3/ Ok, so what are the credit markets signaling right now?
While they’ve recently ticked up ever so slightly, spreads are still historically tight at 1.67% – which is a good thing! (Though this could change.)
And according to the chart below, as of Tuesday:
👉 High Grade credit (lower risk, lower yield bonds) are showing a 12% chance of recession.
👉 High Yield credit (higher risk, higher yield bonds) are showing a 9% chance of recession.
Meanwhile, the S&P 500 is being a total drama queen, showing a 33% chance of recession. 👇
The takeaway:
- If you want to reliably check for recession risk → look for widening credit spreads.
- Stocks and crypto could go lower thanks to market momentum, narrative, and restrictive policy (so dramatic).
- But for now, the credit markets are telling us we’re more likely safe from a recession than not.
Can’t say that’s the worst news to take into the weekend!
SPECIAL GIVEAWAY WITH ARBITRUM
Before we head into the giveaway, let’s learn a bit about Own first.
Own is a brand new L2 that’s all about Real world assets (RWAs).
There’s a bunch of interesting things about Own, but here are 3 short points:
- It’s a government-backed Ethereum Layer 2
- They’re making trading RWAs as easy as trading crypto
- They’re partnering up with Arbitrum to hand out a special giveaway
If you wanna know more about their giveaway, you gotta head to their Discord (spoiler: they’ll be handing out REAL GOLD necklaces)
By leveraging Arbitrum, Own is ready to globalize access to RWAs.
Head to Own’s discord for the special giveaway 👀
INVESTING IN EARLY-STAGE BASE STARTUPS JUST GOT EASIER 💸
The average retail investor has a whole lot of barriers in front of them – and they’re growing.
Fewer and fewer companies are going public, and the ones that do are accumulating more and more value in their early stages than ever before.
Meaning the average investor is locked out of those sweet, sweet early-stage returns.
The 2017-era ICO boom looked like it was about to solve that issue – giving all investors the same access and opportunity from day one…but sadly, those days are gone.
Nowadays, the majority of promising blockchain startups are privately funded long before they have a publicly tradeable token.
…so how can a wider range of investors get that same early access?
Well, there are two key barriers to entry when trying to invest in early-stage startups in the US (whether in crypto, or traditional companies)…
- You need to be an accredited investor (aka: earn $200k+ a year, or have a net worth of $1M+)
- You need to know the right people in order to get in on deals
This latest creation from Coinbase Ventures, solves one of those problems. 👇
The Base Ecosystem Group essentially gives any accredited investor the ability to invest (onchain) in early-stage startups that are building within the Base ecosystem.
(Solving the ‘you need to know the right people’ problem.)
And while it doesn’t lower the barrier to entry re: needing to be an accredited investor – it does open the door for a wider range of investors to get exposure to early-stage startups building on Base.
Moral of the story: Coinbase refuses to stop shipping new, game-changing products/services.
(And we’re here for it!)
WANT TO COME TO OUR MEETUP AT ETH BUCHAREST?
This is what happens when you leave it to the intern to organize a meetup…
Look, we can’t guarantee Raul will run a silky smooth operation – but one thing’s for sure: it’s going to be a good time!
So, if you're planning to attend ETH Bucharest, sign up to our event here!
Don't have a ticket to ETH Bucharest yet? Get 60% OFF your ticket here!
BITE-SIZED COOKIES FOR THE ROAD 🍪
Looking to get exposure to $BNB on TradFi rails? Check out $OBNB! It’s the first tradable ticker for a security that provides exposure to $BNB on the US stock market.*
Another day, another crypto purchase made by WLFI. This time around, they’ve bought $100K of $SEI. Not a big amount but still worth noting.
Three massive countries are using crypto for trade payments! To bypass Western sanctions, Russia is using $BTC, $ETH and $USDT to trade oil with India and China.
Is this the best thing to come out of Kentucky since Colonel Sanders? The Kentucky Senate just passed a bill protecting $BTC self-custody rights.
We’ve partnered up with NordVPN. Buy any 2-year NordVPN plan, get a 72% discount and an additional 6 months of free VPN. If you ask us, this is actually a crazy deal.**
*this is sponsored content. **this is partner content.
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
