Adding ETH Beta (Core Strategy Rebalance)
Today's employment numbers broadly met investor expectations, placating a nervous market. Risk assets rallied, aligning with our view that yesterday's de-risking would not persist through today.
Yields continued their downward trajectory, and Fed funds futures also declined, reflecting the market's adherence to the Fed's dovish messaging.
Yields Falling:
Fed Funds Futures Showing More Cuts:
Oil prices nearing YTD lows likely assisted in alleviating near-term concerns about inflation reigniting.
With the weekend approaching and no critical macro data expected until Wednesday (CPI), barring any geopolitical surprises, we recommend leaning into the currently favorable market conditions within crypto. This environment appears especially conducive to weekend trading.
Of note, ETH has shown significant strength over the past couple of days, rallying above $4,000—a level it hasn’t sustained in some time.
Last week, we highlighted how conditions and flows in traditional markets (CME basis, ETF flows, small-cap tech outperformance) pointed to strong risk/reward for ETH, and this thesis appears to be playing out.
Small Cap Tech Outperformance:
Reports you may have missed
INDICATIONS OF FROTH Given the violent nature of the past month’s rally, we have been vigilant for signs of a local top. It would be disingenuous to claim that some qualitative "top signals" are not flashing right now. XRP—which we noted as a possible election trade back in October—with only 1–2k daily active addresses (vs ETH's over 400k, source: Artemis), is ripping toward new highs while influencers take to TikTok...
TURNING CAUTIOUSLY OPTIMISTIC There is a lot of pain in the ETHBTC chart. It peaked in December 2021 and, save for several brief rallies, has been on a downwards slope ever since. It peaked at just under 0.09 and currently trades around 0.038. Source: TradingView Fortunately, we have anchored most of our attention on BTC and SOL this cycle, as BTC has continued to lead the market in a generally...
BTC DECOUPLING FROM EQUITIES Over the past two weeks, BTC has begun to decouple from other risk assets. While the broader macro environment experienced choppy conditions from November 12th through yesterday, BTC has appeared indifferent to fluctuations in risk appetite, continuing its upward momentum and approaching the $100K milestone. A chart of BTC correlations highlights this decoupling, with sharp declines in its correlation to the QQQ, SPX, and IWM. The...
Market Lacks Convincing Signs of Market Froth, Major Demand Side Catalyst for CORE (Core Strategy Rebalance)
FROTH OR REPRICING? A heated debate is unfolding among crypto investors: have we just hit a local top, or will the breakout after eight months of consolidation continue higher through year-end? The crypto market has surged rapidly, as we anticipated, but the key question remains—can this rally sustain itself, or is it nearing exhaustion? Anecdotally, we are seeing renewed interest in crypto from casual observers. Friends and family are once...
