Government Selling Seems to be Complete

Last week, we highlighted the negative seasonality from mid-August through September but emphasized that macro trends and identifiable crypto-specific factors should take precedence in assessing risk.

Since last week’s CPI print, conditions have been favorable for crypto – yields and the DXY have fallen in a non-recessionary manner (more Goldilocks than risk-off), and rate-sensitive assets like IWM and RSP have rallied.

Stablecoin inflows have also surged over the past couple of weeks – normally a very bullish sign for the wider crypto market.

Yet, BTC has underperformed, lacking the upside beta we would typically expect given such a conducive macro setup.

We attribute much of this underperformance to the selling of 10k Silk Road BTC, which was transferred to Coinbase Prime last Wednesday. We shared the chart below in our Crypto Comments video on Tuesday. This displays an apparent disconnect in performance during US market hours vs the rest of the world, starting with the transfer of the Silk Road coins to Coinbase Prime last Wednesday. To us, this suggests that this supply overhang has been a key factor contributing to the capped upside in BTC.