Historical Data Suggests Volumes Bottom This Week
Lower Volumes Persist
Earlier this week, we witnessed approximately $2B in open interest being unwound within a matter of hours—a significant forced deleveraging event for an otherwise uneventful Tuesday, lacking a clear catalyst.
In our view, the selloff was largely technical and indicative of the negative seasonality we've been discussing recently. To backtrack, Monday and Tuesday followed a dovish Fed pivot at Jackson Hole, sparking a sharp rally in soft-landing plays like IWM and KRE—BTC included.
However, by Tuesday, this rally had lost steam. With substantial leverage built up and the macro backdrop stalling, there wasn't enough spot demand to push prices higher, triggering the unwinding of that leverage in an already illiquid market.
It's worth delving into some charts to better understand the dearth of spot market volumes.
In summary, spot volumes remain consistent with summer doldrums levels and have trended lower since the yen carry trade unwind on August 5th. Notably, trading activity on Coinbase is particularly subdued, further evidence that the US institutional bid for BTC has yet to return.
Below, you'll find BTC volume data across all spot exchanges. The forced selling around August 5th caused a clear spike, but both the 7-day and 3...Reports you may have missed
CORE STRATEGY Our base case assumes that the macro environment will remain accommodative for crypto through year-end. However, in light of recent market action, we remain alert for signs of a local top (not a cycle top). That said, it is difficult to justify a risk-averse stance at this stage and think it is right to lean into this altcoin rally. Source: TradingView, Fundstrat Source: TradingView, Fundstrat STRONG DOLLAR +...
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: Source: TradingView Fed Funds Futures Showing More Cuts: Source: TradingView Oil prices nearing YTD lows likely assisted in alleviating near-term concerns about...
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...
