Emerging Markets and The Future Of Blockchain

In the first ten years of the expansion of blockchain technology, it was utterly dominated by developed (or more precisely western) nations. But emerging markets like Africa are adopting crypto faster than their global counterparts. This growth is even more impressive when one considers that there has been very little institutional support for blockchain technology in these nations.

The growth in blockchain adoption has been concentrated in. Kenya, Nigeria, South Africa, and Tanzania, which are some of the most densely populated nations on the continent, which have been banned from crypto trading. In the first ten years of the expansion of blockchain technology, it was utterly dominated by developed (or more precisely western) nations. Almost all the Bitcoin Miners were located in America and Europe, and only rising mining costs moved those operations abroad.

Asides from that, many of the earliest Bitcoin/blockchain innovators were either westerners or living in western countries. For example, Vitalik Buterin, while being Russian-born himself, had been in Canada for the better part of two decades before creating Ethereum. However, as blockchain technology is moving into the next phase of its development, it appears that emerging markets like Africa are adopting crypto faster than their global counterparts. While no one knows the reason for this, it’s very difficult to deny that it’s happening. The numbers are simply undeniable.

For example, cryptocurrency adoption grew in Africa by 1200% between the 12 months between July 2020 and June 2021. Regardless of whether this was brought on by the financial uncertainty of the pandemic or other clusters of reasons, the effect of this growth can hardly be ignored. This growth in blockchain adoption has been concentrated in countries Kenya, Nigeria, South Africa, and Tanzania, which are some of the most densely populated nations on the continent. Peer-to-peer trading, which is a huge part of blockchain technology, is so big in Kenya that the country led the world in P2P transactions in 2022.

All this points to an exciting future for blockchain technology in these markets. This growth is even more impressive when one considers that there has been very little institutional support for blockchain technology in these nations. Many of the regulators in these countries have banned crypto trading, which has slowed down adoption. Despite that, the rate of adoption is still incredible. All this points to one thing; blockchain technology adoption might already have plateaued in the West, but this is just the beginning in emerging markets like Africa.

The Opportunities are Limitless

The blockchain ecosystem of emerging markets might not be as huge as that of developed nations, but it’s rather apparent that blockchain technology solves more structural problems in these markets than elsewhere. For example, in nations where inflation is rampant — like Zimbabwe — citizens can safeguard their wealth with stablecoins. Interestingly, I addressed the structural problems of P2E economies here and recommended the need for a dedicated stablecoin to fix these structural problems.

Blockchain technology also gives a level of autonomy to citizens in nations with oppressive and dictatorial governments. In countries where governments can unilaterally freeze bank accounts of dissidents, digital stores of value like cryptocurrency can be a real vehicle of social change.This is indeed already happening. In 2020, there was at least one case of a popular protest funded in part by Bitcoin. Bitcoin was rather useful for the protest because of the anonymity and decentralization built into the coin’s infrastructure on the blockchain.

Asides from the monetary use of blockchain, it also has administrative uses as well. By applying blockchain technology to supply chain management, countries can greatly improve asset recording, tracking, assigning, linking and sharing; developing nations can build resilient supply chains without using an overinflated bureaucracy. This can be especially useful for developing nations that are battling supply chain issues. Blockchain can be useful in the entertainment industry as well. It can be used to prevent privacy in the industry, protect digital content, and facilitate the distribution of digital collectibles.

There are opportunities in gaming too. While Play-to-Earn games with NFT characters have gotten a bad rep because of how expensive it is to purchase a character, companies like Rainmaker Games are solving this problem. Rainmaker Games, for example,  is one of the most exciting companies revolutionizing games for the future. Within just a few months, Rainmaker Games has found a way to vet the identity of players who are joining guilds, figure out a way players can play hundreds of P2E games for free, and also incorporate an NFT marketplace on all of that.

With startups like Rainmaker Games lowering the barrier of entry for P2E gamers from emerging markets, it’s only a matter of time before these players stand toe to toe with the rest of the world. Asides from the structural shakeup a startup like Rainmaker Games can cause with its technology; there’s also the matter of the financial freedom these P2E games can give to players from emerging markets.

The NFT Goldmine

Despite the opportunities on the blockchain, it’s obvious that the same enthusiasm for crypto in emerging markets has been missing. One reason that has been brought up is the unfriendly technical nature of NFTs. And that could be a good point. After all, the more technical using a technology is, the fewer people use it.

Perhaps that’s why players in Web3 are already working on the important infrastructure that will help builders scale technical barriers to entry and build products faster and cheaper in the ecosystem. Ankr is one of those stakeholders, and the company provides fast, reliable infrastructure at community first pricing. It isn’t just infrastructure either — the company does everything from helping enterprises integrate with Web3 to allowing DeFi users to stake their coins and earn higher yields.

Right now, NFTs have taken on a lot of different forms, but there’s one that remains elusive; representation from emerging markets.While developing nations seem quite capable of holding their own and accelerating their development when it comes to crypto, the markedly lukewarm attitude toward NFTs has continued unabated. We know that the reason isn’t because of lack of utility. NFTs have proven that they can solve the problem of monetization for content creators and solve the problem of piracy for artists.

This means that NFTs have a huge future in these emerging markets — even if adoption isn’t on the up and up as it is with crypto. The problem, it seems, is with the complexities of releasing a token and a much higher tech barrier to entry. Cryptocurrency has largely avoided these problems due to a friendlier technical environment. For example, there are centralized exchanges for crypto where people with limited technical knowledge can just open an account and buy their cryptocurrency.

While there is also something like that for NFTs — Opensea is a great example — it isn’t targeted at or built for content creators in emerging markets.Thankfully, some NFT companies are also already solving the problem of higher technical barriers to entry. Ayoken Labs, for example, is building an NFT platform where artists and content creators from these emerging markets can release their social tokens, and essentially monetize their content efficiently.

This platform not only monetizes content for creators but also rewards fans and users in general with its native token for use. In a way, it’s like a play-to-earn game but without the gaming aspect.It’s clear that there are limitless opportunities in the blockchain space in emerging markets. It’s almost inevitable that more startups will come into the space and create solutions that are tailor-made for these markets. It is now a matter of when — not if. Today, the developed world is the capital of blockchain innovation. But it might not be for long.

By Victor Fabusola

Five Oversold Small Cap Stocks And One Mid Cap For Bear Market Bargain Hunters

The S&P 500 is hitting new 2022 lows in this year’s brutal selloff leading up to Wednesday’s Federal Open Market Committee meeting where the Federal Reserve’s policy committee is expected to hike short-term interest rates aggressively to tamp down inflation. The large cap index is down 22% from its peak on the first trading day of the year and tumbled 10% in just the past week as the latest readings on inflation showed price increases accelerating. For small caps, the market’s stumble into bear market territory has been exceptionally severe, with the Russell 2000 index down 30% from its peak last fall and back to pre-pandemic levels.

There could be plenty of near-term volatility ahead as the Fed accelerates its rate-tightening cycle. JPMorgan and Goldman Sachs both expect a hike of 75 basis points this week, even though Fed chair Jerome Powell dismissed that possibility at its last meeting a month ago. Last week’s 8.6% inflation reading put central bankers on their heels. But with the stock bloodbath already well underway, investors and asset managers are licking their chops at some valuations, if they have dry powder to deploy.

“The risk in the stock market is far lower today than it was six months ago just by virtue of the correction that we’ve seen. A lot of the excesses are being flushed out as we speak,” says Nicholas Galluccio, co-portfolio manager of the $57 million Teton Westwood SmallCap Equity fund. “We think it’s a perfect setup for possibly a strong 2023.”

Galluccio’s fund has outperformed the market, losing 13% so far this year after a 30% gain in 2021, to earn a 5-star rating on Morningstar. He’s been on offense this year adding to his positions in several small caps trading at low valuations, including Carmel, Indiana’s KAR Auction Services, which builds wholesale used car marketplaces and generated $2.3 billion in 2021 revenue.

Used car retailer Carvana bought its physical auction segment for $2.2 billion in February, larger than the market cap of the company at the time, though the proceeds were used to pay down debt. The acquisition prompted a 38% one-day pop in KAR’s stock, but it has given back most of those gains in the recent correction. The deal hasn’t been as kind to Carvana, which has lost 91% of its value this year.

“We got very lucky that Carvana we believe overpaid for their physical auction business for $2 billion, which is an enormous sum,” Galluccio says. “Now they’re strictly digital with a virtually debt-free balance sheet.”

Another of Galluccio’s picks is Texas-based Flowserve (FLS), which manufactures flow control equipment like pumps and valves. Many of its customers are petrochemical refiners and exploration and production companies in the energy industry. Most energy-linked businesses have had a strong year with the price of crude oil surging, though Flowserve has lagged with a 5% decline. Its bookings rose 15% in the first quarter to $1.1 billion, and Galluccio expects its margins to improve as it builds its backlog.

Value investors are also looking at oversold areas of the market for stocks trading at tiny multiples and now offering attractive dividend yields. John Buckingham, portfolio manager and editor of The Prudent Speculator newsletter, likes the Whirlpool Corp. (WHR), a century-old home appliance manufacturer headquartered in Benton Charter, Michigan. With home sales falling, Whirlpool has exposure to an anticipated recession, but its stock is down 34% this year, trading at six times earnings, with a dividend yield over 4% and an appetite for buying back shares. While not a small cap, at $8.7 billion in market capitalization, this mid-cap has long been a favorite of value investors.

“Lower home sales are certainly a headwind, but the market has already discounted something far worse than what we think will ultimately occur,” Buckingham says. “If we have a quote-unquote ‘mild recession,’ I think that many of the businesses have already been priced for a severe recession.”

Another consumer business Buckingham singles out from his portfolio: Foot Locker (FL). The shoe retailer is down 36% this year, including a 30% drop in one day on February 25 when it said its revenue from its biggest supplier Nike NKE +2.5% would decline this year as the apparel giant increasingly sells directly to customers. Now, Foot Locker trades at a tiny 3.5 times trailing earnings, with a 5.7% dividend yield to attract income investors.

While those value plays are cheap, Jim Oberweis, chief investment officer of small-cap growth firm Oberweis Asset Management, makes the case that growth stock valuations are even more attractive after taking the worst of the selloff so far. The Russell 2000 growth index is down 31% this year, and Oberweis’ small-cap opportunities fund has declined 22%. One outperformer is its top holding, Lantheus Holdings (LNTH), which has already more than doubled this year.

Lantheus makes nuclear imaging products that can be injected into patients and make body parts glow during medical scans to help diagnose diseases. It received FDA approval last year for a product called Pylarify which can identify prostate cancer, and fourth-quarter revenue rose 38%. The Massachusetts-based company trades at about 20 times expected 2022 earnings.

“It’s very hard to find a company at 20 times earnings with those growth numbers and those kinds of moats in terms of patents and defensible market positions that are very difficult for competitors to attack,” Oberweis says.

Oberweis boasts that Lantheus has no correlation to the broader economic environment and recessionary fears. Some of his other top holdings do have some inflation exposure but have already been deeply discounted this year and are trading at multiples more typical of value names. Axcelis Technologies (ACLS), which sells components to chipmakers like Intel INTC and TSMC to make semiconductors, grew its revenue by 40% in 2021 and another 53% in the first quarter of 2022, but has declined by 25% this year and trades at 15 times trailing earnings.

“Small growth stocks, which have been bludgeoned, I think have much better prospects to do well in an inflationary environment because many more innovative companies have pricing power, the ability to quickly raise prices and get the customers to actually pay them,” Oberweis says. “I don’t know if it’ll be this year or next year, but I think people buying right now are likely to earn significant positive returns because of the low valuations.”

I’m a reporter on Forbes’ money team covering investing trends and Wall Street’s difference-makers. I’ve reported on the world’s billionaires for Forbes’

Source: Five Oversold Small Cap Stocks And One Mid Cap For Bear Market Bargain Hunters

In trading on Tuesday, shares of the Vanguard Small-Cap ETF (Symbol: VB) entered into oversold territory, changing hands as low as $180.29 per share. We define oversold territory using the Relative Strength Index, or RSI, which is a technical analysis indicator used to measure momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In the case of Vanguard Small-Cap, the RSI reading has hit 29.8 — by comparison, the RSI reading for the S&P 500 is currently 33.6. A bullish investor could look at VB’s 29.8 reading as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.

Looking at a chart of one year performance , VB’s low point in its 52 week range is $180.29 per share, with $241.06 as the 52 week high point — that compares with a last trade of $183.66. Vanguard Small-Cap shares are currently trading down about 0.5% on the day.

ACV Auctions (ACVA)

The company has been public for just under one year, having held its IPO on March 24 of last year. The initial offering saw ACV put more than 19 million shares on the market, at a price of $25 each, and the company raised $414 million in new capital. Since the IPO, however, ACV stock price has fallen by 63%.

Despite the fall in share price, ACV has been reporting solid year-over-year revenue gains. In the last quarter reported, 3Q21, the company showed $91.8 million at the top line, up 36% yoy. This included a 41% gain in Marketplace and Service revenue, which accounted for $78.3 million of the total.

Arbe Robotics (ARBE)

The company entered the public markets in October of last year, completing a SPAC combination at that time with Industrial Tech Acquisitions. The ARBE stock started trading on the NASDAQ on October 8, and the company realized $118 million in gross proceeds from the transaction. The stock quickly surged to a peak above $14 in November, and has since fallen 48% from that level.

Even though the stock has fallen, Arbe has had some solid wins to report in recent months. BAIC Group, a Chinese auto manufacturer, announced in November that Arbe’s radar systems are expected to be installed on BAIC Group’s new vehicles going forward, and that same month, Weifu, a Chinese tier-1 auto parts supplier launched a customer road-pilot phase of Arbe’s radar systems and chipsets. Weifu expects to have the systems in full production by the end of this year.

ALX Oncology Holdings (ALXO)

The company has had several recent updates on its evorpacept programs, and released the announcements in January. The updates include the expected initiation of a Phase 2/3 clinical trial for the treatment of great gastric/GEJ cancer. This trial will evaluate evorpacept in combination with several other therapeutic agents, including Herceptin (trastuzumab), Cyramza (ramucirumab) and paclitaxel.

Another upcoming catalyst announced in January concerns the Phase 1b trial of an evorpacept-azacitidine combo in the treatment of MDS, myelodysplastic syndromes. The company will be releasing the dose optimization readout of this trial during this year.

The final January update came from the FDA, which granted evorpacept its Orphan Drug Designation in the treatment of gastric cancer and gastroesophageal junction cancer. Orphan Drug Designation comes with financial benefits, including tax credits and user fee exemptions for the company….

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Best ETFs For Rising Interest Rates

ECB Warns House Price Correction Looms As Interest Rates Rise

Eurozone property prices are set to correct as interest rates begin to rise in response to higher inflation, posing greater risks for low-income households, the Bank has warned. Central European.

A reversal in the region’s housing markets was one of the main risks identified by the ECB’s biannual financial stability review, which also warned that Russia’s invasion of Ukraine meant more companies were likely to default due to weaker growth, higher inflation and rising borrowing costs. .

Anticipating that asset prices could fall further if economic growth continues to weaken or if inflation rises faster than expected, the ECB said a sharp rise in rates could cause a “reversal” in oil prices. real estate in the euro zone, which it said were already overvalued by around 15%, relative to overall economic output and rents.

The central bank is preparing to raise its deposit rate in July for the first time in a decade and markets are expecting four quarter-point hikes this year, which it says “could challenge the valuations of riskier assets, such as equities”.

Mortgage rates in the eurozone have already been rising since the start of the year. The ECB’s composite indicator of the cost of borrowing to buy a home rose from a low of 1.3% last September to 1.47% in March.

“A sharp rise in real interest rates could induce house price corrections in the near term, with the current low level of interest rates making a substantial reversal in house prices more likely,” the statement said. ECB.

House prices rose nearly 10% in the euro zone last year, the fastest rate in more than two decades, according to data from Eurostat, the statistics office of the European Commission. They could fall between 0.83 and 1.17% for every 0.1 percentage point increase in mortgage rates, after adjusting for inflation, the ECB calculated.

The Bundesbank recently warned that German banks were becoming too complacent about the risk of borrower default and the possibility of rising interest rates, increasing the amount of capital lenders must put up as collateral for their mortgages.

“We think the German real estate market should peak in the next two years, probably around 2024, although it could be much earlier if we have an interest rate shock,” said Jochen Möbert, an analyst at Deutsche Bank Research. .

Rising interest rates will likely prompt institutional investors to shift money they have put into real estate into the German bond market, Möbert said, predicting that would likely happen when Bund yields rise from 1 % currently at between 2 and 4%. .

“Rental yields are below 4% in German cities on average and in metropolises they are lower, in some cases they are even 2.5%, so once the risk-free rates reach this level, it would be logical to go back to the Bunds,” he added.

The central bank said a switch to fixed-rate mortgages would shield many households from the immediate impact of rising borrowing costs.

Wealthier households could also cushion the blow by saving less or tapping into extra savings accumulated during the coronavirus pandemic, he said. However, he warned that this would leave lower-income households “more exposed to the inflationary shock”.

The ECB said its recent “vulnerability analysis” of the banking sector had shown it was “resilient to the macroeconomic ramifications of the war in Ukraine”.

Banks accounting for more than three-quarters of the sector’s assets would maintain a Tier 1 capital ratio above 9% in its “worst case scenario”, in which the eurozone economy shrinks over the next three years, it said. said the central bank.

Rising interest rates should increase banks’ credit margins in the short term. But Luis de Guindos, vice-president of the ECB, warned that “in the medium term, the situation could be different”.

De Guindos said banks’ profit margins could be eroded by a “duration gap” between rising short-term funding costs for banks and their longer-term loans, such as mortgages, which hold rates down. down for many years.

He admitted that the ECB had been “too pessimistic” in its 2020 warning that the fallout from the pandemic could lead to a €1.4 billion increase in non-performing loans for banks, which did not unfold. materialized as bankruptcies have instead fallen thanks to massive state support.

However, he said rising inflation and rising borrowing costs could cause some companies that have already been weakened during the pandemic to default. “Perhaps the insolvencies that didn’t happen during the pandemic could, at least in part, happen now,” he added.

ECB warns that a correction of prices real estate profile with rise of interest rates

Source: ECB warns house price correction looms as interest rates rise

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Stock Market Outlook: Bear Rally Conditions Not Sustainable, MS CIO Says

  • Lisa Shalett, the CIO of wealth management at Morgan Stanley, said in a note last week that stock investors have been too optimistic.
  • She argued that recent strength in stocks may be a bear-market rally driven by “wishful thinking” and excess liquidity.
  • Shalett laid out three risks, including Fed policy tightening, higher rates, and macroeconomic headwinds.

Investors should be wary of stock-market stability off recent lows, says the CIO for Morgan Stanley’s wealth management division.

“Recent strength in the equities market may be nothing more than a bear-market rally, fueled by wishful thinking and excess liquidity,” Lisa Shalett wrote in a recent report.

Despite a rocky week, global stock indexes are still up markedly from recent lows, with the S&P 500 and tech-heavy Nasdaq 100 having gained more than 3% over the past month. But both benchmarks are still down big on the year as investors have grappled with sky-high inflation, rocketing commodity prices, and a series of rapid US rate increases.

Shallett said the gains seen so far in April were down to investors hoping the Federal Reserve would engineer a “soft landing” by raising rates quickly enough to cool inflation but without sending the economy into a recession.

The Fed raised interest rates in March for the first time since 2018, taking a big step to tame inflation at its highest for 40 years in the US, and planned a series of at least six more hikes this year. Markets are pricing in expectations for a 50-basis point hike from the Fed’s next meeting in May and possibly more at subsequent meetings.

The Fed is also expected to shrink its balance sheet by $95 billion a month, according to its most recent meeting minutes. Futures markets show investors believe US rates could be as high as 2.75% by the end of this year, compared with 0.5% right now.

Shalett said she disagrees with the view that investors seem to hold that the Fed hiking interest rates wouldn’t affect stock valuations, and were ignoring macroeconomic risks from the Russia-Ukraine war and slowing growth.

“Morgan Stanley’s Global Investment Committee disagrees with these sanguine views and believes some of the more cautious signals coming from the bond market may better reflect the likely path ahead,” she said.

For starters, she said the Fed is expected to raise rates more times than market expected three months ago and would cut billions more a month than expected from its asset holdings.

“Such aggressive tightening will make the Fed’s policy execution highly complex, and historical examples suggest that even when the central bank does manage to land the economy softly, markets often feel a much harder impact,” she said.

In her opinion, investors are underestimating the potential hit to the stock market from a series of rapid rate rises and the effect those have on the underlying economy.

“This may be wishful thinking. We believe the Fed is apt to tighten policy more than many investors expect, impacting real rates and valuations as a result,” she said.

Lastly, Shalett said input costs, including wages, are still rising for companies, US growth will slow and there is a real risk of recession in Europe stemming from Russia’s war in Ukraine, especially if the single currency bloc halts imports of Russian energy.

With all that in mind, the double-digit gains of 2020 and 2021 will be harder to pull off, she said.  “As financial conditions tighten, a strong but slowing economy is unlikely to be enough to power substantial passive index gains from here,” she said.

Yields will rise for two reasons: (1) more potential renters than landlords and (2) house prices will fall. So, over the coming period we will see higher rents and lower house prices leading to higher rental yields and ultimately a huge investment opportunity.

The Chinese stock market has, since the credit crisis started, lost 50% of its value, much more than the developed world’s markets but the difference is that we consider that China’s stock market is still a primary bull market. Accordingly, we cautiously sit on the sidelines waiting for the best opportunity to buy it.


Source: Stock Market Outlook: Bear Rally Conditions Not Sustainable, MS CIO Says


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