Hawks Start to Circle
Key Takeaways
- The Fed announced an expedited tapering of monetary stimulus and anticipates three rate increases in 2022. We discuss the implications.
- Based on recent price action, BTC still behaves more like a high-beta tech stock than an asset designed to offset the effects of inflation.
- This week, SOPR broke through to profitable territory. Short-term SOPR is lagging, which signifies that the market may need to shake out a few more "paper hands" before marching onward.
- At the time of writing, the total illiquid supply of Bitcoin is at an all-time high. Notably, 76% of the total circulating supply of Bitcoin is now in the hands of illiquid entities (“diamond hands”).
- On Monday, Bitcoin reached a significant milestone as 90% of the total Bitcoin supply has now been mined.
- Bottom Line – While we continue to monitor Bitcoin's price action to confirm a breakout to the upside, we maintain a constructive outlook on the leading cryptoasset. Additionally, we still see the potential for Ethereum outperformance and view our altcoin baskets as an opportunity for those venturing further out on the risk curve.
Investors Buy the FOMC News
Last week, we noted that despite recent liquidations, investors should maintain a constructive outlook on Bitcoin and the broader cry...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...
