Crypto Climbing the Wall of Worry, Flows Suggest There is Still More Work to Do
Core Strategy
With lingering trade war talks and robust economic data dissuading a dovish Fed pivot, we think the potential for downside volatility remains elevated. While regulatory developments and institutional adoption continue to bolster the medium- to long-term outlook, no immediate “good news” seems likely. Nevertheless, we still expect crypto to outperform this year. Until we see flows return to crypto, raising cash/trimming altcoin positions appears prudent (BTC dominance higher).
The Semi-Good News
Clients know that, as of late, we have taken a tactically conservative view on the crypto market since the specter of a prolonged trade war arose at the start of the month. We deemed current conditions appropriate for raising some cash and avoiding over-allocating to long-tail altcoins. This stance has been driven by increased risk around tariff discussions, along with stronger economic data suggesting that the Fed is less likely to adopt a dovish posture in the immediate term. Furthermore, while we are excited about potential regulatory developments and the adoption of state-level SBRs, it is unclear whether any of these initiatives will become effective within the next month or two.
Despite this tactical conservati...