Pangea founder: Why I believe there are huge short-selling opportunities in the future market?
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Pangea founder: Why I believe there are huge short-selling opportunities in the future market?
I believe there is a significant short opportunity for $ETH around $1,200 in the next two months.
Navigating Web3 tides with focused insightsAuthor: Daniel Cheung, Founder of Pangea
Translation: TechFlow intern
I believe there is a significant short opportunity in $ETH around $1,200 within the next two months. We haven't yet seen the real collapse—July and August could be the worst months. Here's my thinking:
We are currently in a broad "macro trade" regime. If you plot $ETH and $BTC prices against inflation data, you’ll find that crypto markets are highly sensitive to macroeconomic trends. Cryptocurrencies have remained closely tied to the Nasdaq index.
To be precise, $ETH has a correlation of about 0.8 with Nasdaq and a beta of approximately 2.0. Given the current lack of catalysts in crypto, this relationship is unlikely to change over the coming months. The ETH merge may happen in October/November, while the Dank Sharding roadmap suggests we’re still years away.
Simply put—for at least the next two months, $ETH will likely act as a leveraged and liquid bet on Nasdaq, offering a more aggressive way to express your views on macro conditions, inflation, corporate earnings, etc.
The problem now is I believe the Nasdaq still has substantial downside. In an environment that’s arguably even more uncertain, we’ve only declined about 30% from the recent all-time high (ATH), whereas prior to the 2008 ATH, the drop was around 45%. QQQ still has over 20% potential downside, meaning $ETH could fall by more than 40%.
Stock prices are driven by two things—future earnings and the multiple you're willing to pay for those forward earnings. The recent stock market decline has largely been due to multiple compression caused by rising rate expectations. We’re only just beginning to see the early stages of earnings downgrades. Many hedge funds and fund analysts I speak with still aren’t acknowledging a full-blown recession, and few are willing to do so—it’s a tough career move.
Therefore, over the next few months, we may see repeated downward revisions in earnings, especially given this is a unique market phase that few investors have experienced. This will push equities lower, dragging crypto down with it.
By the way, people often assume stocks are already cheap (e.g., “Coinbase trades at 8x P/E”), but that’s inaccurate. As long as earnings continue to be cut, declines will persist.
So why short ETH at $1,200 here? Because this level is gathering too many negative signals.
1) Mid-year GDP outlook on June 29
2) CPI release + FOMC in early July
3) 2Q22 corporate earnings season starting late July
All of these could further destabilize the stock market. Here’s what I expect:
GDP growth figures will be released tomorrow. I expect the numbers to show consecutive declines. This would strengthen the argument that we’re already in a recession, given two consecutive quarters of negative growth, rising unemployment, and wage cuts. We’ve already heard from Atlanta that GDP data could be ugly.
A recession brings three main consequences:
1) Increased uncertainty = more downside
2) Earnings will need further cuts
3) Further compression in valuations
I don’t buy the argument that a recession will make the Fed less hawkish and trigger a stock market rebound, because:
1) Inflation remains high and hasn’t slowed sufficiently
2) Any benefit from fewer rate hikes will be offset by lower earnings and increased uncertainty
I believe the June 29 GDP print is the first domino needed to see $ETH fall to $500 in the near term.
Following GDP, we have CPI and the FOMC meeting. A key theme here is that inflation could worsen in July and August because:
1) Travel demand hasn’t fully reopened
2) Oil demand surges in summer (e.g., July 4 holiday, etc.)
3) Housing prices continue to rise
4) Food prices keep deteriorating as oil prices rise
This will further sap market momentum. Moreover, recent market action shows growing skepticism toward Fed commentary on rate hikes—adding to downside risks.
If GDP, CPI, and FOMC all unfold as expected—we could see $ETH back into triple digits.
For years, tech investors have grown complacent amid rising profits and wages (especially in software). I remember analyzing public equities and finding that software stocks rose after earnings 80% of the time.
I believe this is about to change. We’ve already seen major well-known companies cutting staff (e.g., Tesla) and issuing growth slowdown warnings (e.g., Snapchat). I think this is just the beginning.
I’ve spoken with employees at other large, well-known firms who tell me more and more companies are lowering internal targets for the first time in years.
Second-quarter earnings could be the final domino—the moment when the crypto market truly capitulates. Add to that liquidations triggered by ETH falling below $1,000 and crypto sentiment already at historic lows, and this could mark the start of a disaster.
In summary, I believe shorting $ETH at $1,200 presents a highly favorable opportunity—everything is in place except the trigger. Remember to protect your position—I suggest setting $1,300 as a stop-loss or reload point.
Disclosure: Pangea does not engage in shorting; this is merely my personal view. This content is for informational purposes only and does not constitute any investment advice.
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