Champagne Problems

Nasdaq concentration continues! Monero thwarts initial Qubic miner attack

Hey everyone welcome to another weekend edition of Magnelibra Trading and Research (MTR). There is so much to cover from the equity markets, to the Monero 51% attack to interest rates and Silver. Honestly there is so much going on from all sorts of directions, its hard to just gather ones thoughts to formulate a cohesive missive. This is why formulating a game plan each week is important, because we never know where the next catalyst will come from. To make things even tougher, some of the things that we may believe are important systemically, often become irrelevant and others that we never thought really matter, somehow become relevant.

Its one of those things we can’t rely quantify accurately, does Trump and Putin meeting even matter, or does a Houthi rebel firing rockets in the straits have a more pronounced effect? Do we even care about marked to market losses, fake payroll reports or Israel/Iran and Gaza? See how fast the Iran/Israeli event has come and gone?

Our current time line is full of major geopolitical risk, major financial risk, yet somehow it all to often seems that its here one minute and then it is gone the next.

Makes me wonder if all this 24/7 inundation of data is well 99.9% glitter and 0.1% gold. I guess this is why I do what I do. I don’t feel like I’ve been around forever but spending nearly 30 years having to respond, react and formulate trading gameplans, you end up learning a thing or two. We remember when a $1bln fund was a big deal, now its just your average.

One of the things I have come to learn is that time moves on, it waits for nobody, you either adapt to it or you lose relevance. That old saying, the more things change the more they stay the same. Another thing I have come to know is that the Federal Reserve is at the center of the financial universe and its a lot more important than many consider.

I like to emphasize their importance as much as I can because when we look at the massive amount of data and occurrences across time, one thing good research scientists do is they are able to spot correlations, to spot constants and in this regard it provides the necessary foundation for forming base case scenarios allowing for extrapolation.

With that, long time MTR subscribers know that the Federal Reserve has expanded its balance sheet at annualized rate of 9.8% for nearly 3 decades now. (our real inflation rate of things)

Magnelibra why does this matter? Well to quote the great Taylor Swift, “Champagne Problems,” of course.

Source: Taylor Swift VEVO

In order to understand why the Federal Reserve is required to expand at such rates is because it is an embedded quality of the very system that they have designed. A system designed to mask deep rooted flaws and fallacies of a monetarist regime, a regime that allows for others to form extreme wealth accumulation not by demanding physical labor but by financial incentivized alchemy.

When these alchemists get it wrong, well this is when the mirage of stability becomes whisked away and the Federal Reserve must do what they always do, create digital money. The do this instead of allowing for a necessary cleansing, a rebalancing of the economic viability that 90% of the people rely upon.

The very small subset of the elite that control everything whether by individual or by conglomerate exposure have champagne problems when risk gets repriced and revalued.

How much real estate can they own, how much equity can they own, how much debt can they take on, how much leverage can they embed before capital is truly exposed?

These champagne problems bring a whole host of issues upon the general masses who rely upon the financial markets for their future and who are certainly more disproportionately affected by consistent inflation. Kinda makes things tough to plan for when debt is growing by trillions a quarter and we all know federal budgets will have to allocate a lot more capital to “interest” rather than productive resources to the benefit of the constituency. No wonder the calls for socialism and as much as everyone makes fun of AOC, don’t think for one minute she isn’t a real threat to capitalism and conservatism, 2028 will come around soon enough, and no doubt she is the new face of the Democratic party. We have a uncanny knack of calling political powers, just like we did in 2014 well before Trump was even a contender and he won in 2016 against all odds. People fail to see what’s right in front of them, quite often jaded by their own misconceptions and inherent interferences:

Source: Time Magazine

The Federal Reserve directives buy decades at a time and generations go by and transfer to the next a much larger debt burden to deal with. There is no question this system is flawed and we owe it to the next generation to create a much more equitable economic system, its altruistic I know but we must at least acknowledge the problem.

When it comes to debt growing at this rate, well, the law of large numbers will eventually force a correction, but its best to tackle obstacles head on and deal with them on our terms rather than forced to deal with them with limited alternatives. Are we at one of those points of inflection now? It sure seems that way, then again time has a way of just moving along, players change but the game stays the same.

To quote Bastille, “if you close your eyes, does it almost feel like nothings changed at all.” That’s what it sure seems like to us, things come and go and somehow the engines of global economies and finance keep rolling on. Anyway with Bastille in mind check out this video with Hans Zimmer, its fantastic! Bastille & Hans Zimmer

Ok so let’s just take a look at that U.S. debt issue shall we and at least quantify the reality that we all face. Yes higher rates are a problem because they impose a much larger interest cost to the U.S. Treasury, thus the call for lower rates is justified in this regard, because what people don’t see, is the fact that on the other side of the U.S. Treasuries liability is the very real risk free transfer of real dollars to the bond holders.

This increases our money supply and is inherently inflationary.

This is where a lot of traditional economists get it wrong, they believe that you tame high inflation with higher rates, yet they never talk about the actual payers of the higher rate and the massive influx of new capital creation. In today’s monetary system, higher rates ARE INFLATIONARY and lower rates will always lead to DEFLATION.

Why? Because it starves the system of risk free interest money pick up. Thus embedded risk has to be repriced to represent a more intolerance or lack of money creation. So here is the chart of interest costs at various 5YR government rates:

We believe by 2027 the Federal Funds rate will be 1.50%. We also believe the the 30YR govt bond will be around 4.00% still. This means those looking for mortgage rates to plunge may not see them much below 5%. MBS Spreads (spread between US govt 10y and Mortgage back securities) continue to be at 240bp wide. For a better picture of what we mean, you can see here from FannieMae:

The real problem with housing is that it has a massive affordability gap and we can demonstrate that in this next chart from Charlie Billelo, so interest rates are one component, but if the economy turns and non farm payrolls start to go negative, then its obtainability and affordability that becomes the issue not rates:

The power of this lack of affordability is also encapsulated in this John Burns, Net Growth/Decline of homeowner households data chart, which shows the first negative quarter in nearly a decade:

So we know where housing stands, and we definitely know where equity valuations stand as this Bravos Research chart showing the Buffet Indicator, can the monetarist regime digitally print our way out of this reversion? Well they will damn well try, that we are certain. The other problem here is that a disproportionate part of the general economy doesn’t participate in this asset price growth:

Ok we will get into all the subscriber data trackers, where we have all the Market Sentiment changes for you and we highlighted late Friday that there would be changes. However let’s talk about the Qubic 51% attack on the Monero blockchain. We will try to sum this up as easily as possible but obviously the technical aspects are not relevant for context here and your welcome to dig further on the subject.

So let’s first look at who Qubic is, they are a decentralized compute and AI Layer 1 blockchain protocol, founded by a team including Sergey Ivancheglo.

What does Qubic do?

• Blockchain Innovation: Qubic combines high-speed transactions with AI integration, using Oracle Machines to incorporate real-time data into its ecosystem.

• uPoW Mining: Instead of traditional PoW (proof of work), Qubic’s mining nodes perform useful work, initially focusing on AI training and, as of 2025, merge mining with Monero (XMR) and Tari.

• Token Economy: $QUBIC tokens are used for network operations, with a mechanism to burn tokens by converting mined rewards into USDT and repurchasing $QUBIC on the open market, aiming to reduce supply and potentially increase value.

• Applications: Beyond mining, Qubic plans to offer distributed AI training, sell computing power to companies, and support autonomous agent infrastructure.

So what does Magnelibra think Qubic is actually doing? I think their strategy of mining Monero is to actually use the proceeds to buy back and burn its own $QUBIC tokens. Basically they are using proceeds to enhance their own token. It also seems like they are running some vulnerability studies on Monero itself looking to find in roads to solving the privacy aspect perhaps looking to exploit the network but ultimately it seems they are enhancing the price of their own coin to entice others to see value in Qubic.

Their effort to formulate a 51% attack has been thwarted as of now, but it does present the Monero Blockchain community with a very real and viable threat to force some further actions toward increasing its hash rate to become more distributed across a much wider range of independent miners and pools. This will make it economically and logistically infeasible for single entities to dominate. Monero’s RandomX algorithm is designed for this but enhancements as time moves forward will definitely by required.

What has the Monero community done in response to this latest test of network integrity?

• Miners shifted to p2pool or other pools to counterbalance Qubic’s 1.6 GH/s peak, which briefly approached 53% of a 3 GH/s network.

• The community is encouraging miners to join decentralized pools or solo mine to dilute the centralized hash rate, aligning with Monero’s philosophy of resisting control by any single actor.

What does a 51% attack actually mean? It represents the percentage of mining power or hash rate that a single entity needs to obtain in order to dominate control over a blockchain.

Why is this a problem?

• Transaction Manipulation (Double-Spending)- This means they could spend the same coins multiple times, defrauding users or merchants. Double-spending undermines this trust, potentially causing financial losses and eroding confidence in Monero’s reliability for private transactions.

• Transaction Censorship- The controlling miner can selectively include or exclude transactions in the blocks they mine, effectively censoring certain transactions. This allows them to block legitimate transactions or prioritize their own which threatens privacy and fungibility, ensuring all transactions are treated equally.

• Network Centralization- A 51% attack concentrates control in the hands of a single entity, undermining the decentralized ethos of blockchain. This centralization makes the network vulnerable to manipulation and reduces its resilience against external interference.

• Erosion of Trust and Market Impact- A successful 51% attack, even if framed as a “demonstration” (as Qubic claimed), damages user confidence in the blockchain’s security and reliability. This can lead to price declines and reduced adoption.

• Broader Implications for PoW Blockchains- The Qubic attack on Monero serves as a stress test for all PoW blockchains, exposing vulnerabilities in networks with low miner incentives or insufficient hash rate distribution. If successful, it could set a precedent for similar attacks on other chains.

So why does a 51% attack matter? It threatens the core principles of a Proof of Work (PoW blockchain), decentralization, security, and trust. For Monero, it risks undermining its privacy-focused mission, destabilizing its network, and eroding user confidence. The incident highlights the importance of maintaining a diverse and incentivized miner base to ensure network resilience, a lesson applicable to all PoW blockchains.

That last part is important because this isn’t just about Monero, as computational power grows, this will be a problem for all decentralized blockchains and adaptation is chief amongst all the survival tactics for any system.

As far as Monero XMR, well this is a great test for it and honestly testing the quality and integrity of any system, allows it to become stronger and advance forward toward the path of resiliency and credibility. As far as the chart its down 11.6% on the week at $268, but let’s keep it in perspective, its +37% on the year:

Ok let’s move to a few technical charts, first up the SPvNQ futures chart to show you how powerful the Nasdaq has been:

What it seems like is perhaps a few hedge funds were sick of underperforming on the year and have now gone all in here on the tech sector. Better late then never I guess, but it will be something to keep an eye on here because if these are new institutional longs, we would expect exits to be very near by. This means we want to see continued buying this week here in the equity complexes.

As far as the SP500 futures, 6500 is weekly target high and 6250 weekly major support:

As far as the QQQ ETF, 581 is this weeks target resistance, lets see if we can get this out early in the week to see if sellers are waiting or if buyers will continue to overwhelm here and establish a new higher range:

With rate cuts now in the picture, we may be seeing a lot of front running into the September meeting, so perhaps we can see a strong bullish move continue here up until the FOMC meeting next month. If this does indeed seem to transpire, we would suspect the FOMC meeting will be used as a sell catalyst then.

As far as yields in the US Govt 10Y its still in the middle of the range and a move below 4.09% would be necessary to usher in some systematic buyers to push yields lower, with 4.50% still major resistance now:

Another futures chart we want to share is Gold, technically very strong but the rejection near $3550 will have to be overcome for bulls to continue to advance. $3375 is support and we would expect it to hold first time down, but a daily close below could prove problematic:

Silver futures also had a very strong technical week, we want to see a move above $40 here and a close above:

Copper is also longer term bullish here after that technical and fundamental bail job down from $5.90 area:

Ok let’s look at an equity chart of Apple, good God it put in a massive week, safe to say maybe some of those new hedge fund longs are being put to place right here. We talked about a close above $215, well it did, so bulls in full control here:

As far as the poster child of the concentration of wealth crowd, well look to none other than Nvidia and Palantir! We’ve been using their chips since the late 90s and well, damn they’ve come a long long way since then:

Palantir, if you don’t think this company isn’t embedded in your everyday lives, well your just not looking, yet we are quite certain that Gotham and Foundry and 14Eyes most certainly are:

Alright everyone this week we have CPI and PPI data alongside some retail data, so lets see what type of picture is painted here. We know its a bifurcated economy and we don’t expect the basic fundamental economics to match the risk assets because honestly one has very little to do with the other.

Anyway have a great week, thank you all for reading and now we will move onto the subscriber only section where we share all our daily insight data like settlements and our market trading sentiment and our MEGA9s portfolio tracker. We design this as an add on enhancement so you learn alongside us as to how view the overall global macro theme as well as how we manage a long only equity book to maximize return and protection measures for directional risk.

We hope you hit that subscribe button, if not just share our work that is more than suitable. Our goal is to educate you so that you see through that 99.9% glitter and consider our words of wisdom that 0.1% Gold!