Things Could Get Weird
Moving Sideways
To the relief of many crypto investors, the market has mostly churned sideways this week. Volumes have receded following the large selloff a couple of weeks ago as Bitcoin fights to avoid its ninth consecutive red weekly candle.
As we have been discussing, altcoins have not found much respite amid the market tumult either, as bitcoin dominance continues to show strength, surpassing 46% again this week. This is an effective demonstration of bitcoin’s safer risk profile relative to altcoins.
The Global Picture
If you follow our research regularly, you are well-versed in bitcoin’s risk profile among traditional macro assets and understand that bitcoin, despite being designed as a form of “macro insurance,” trades in lockstep with earnings-deprived tech stocks. Following the trend of $QQQ during US market hours will provide reliable direction on how bitcoin is trading on any given day. This is important to understand and appreciate because it presents a framework for how to trade this asset amidst tightening monetary conditions, however, bitcoin is a global asset that is traded 24/7 and therefore is unable to follow QQQ every hour of the day.
Thus, we considered it relevant to examine – how does b...Reports you may have missed
MOST SIGNIFICANT BANKING FAILURE SINCE THE GFC Our clients know the rationale behind our bullish perspective on crypto this year. Consumer prices are broadly trending lower, peak-tightening occurred last year (on a rate-of-change basis), and global liquidity conditions have been more favorable than many anticipated. We also felt comfortable that most of the “forced selling” from market participants exiting the ecosystem was behind us. Unfortunately, over the past few weeks,...
REGULATORY THREATS MORE BARK THAN BITE (TO ASSET PRICES) Last week we discussed that more regulatory actions would be coming – and they certainly were. On Monday morning, Paxos was ordered to shut down its services surrounding Binance’s BUSD stablecoin on the grounds that it might be deemed a security. There were worries that there would be additional regulatory action against other centralized stablecoin issuers, but as the week progressed, it...
CRYPTO CONTINUES TO SHOW RELATIVE STRENGTH It was an eventful week in global macro (this is now the default opening line of every note), as consequential headlines rolled across the tape at a rapid clip. Among them:Signs of slowing demand appeared in Apple’s revised agreement with suppliers, and early signs of potential deflation were on display in Nike’s surging inventories.Despite this, the Fed’s preferred inflation figure, PCE, came in extra...
FED RAISED RATES ABOVE FUTURES This week, the Fed went ahead and raised interest rates another 75 bps in its attempt to stimy demand and bring down the prices of consumer goods. While the rate hike was already priced in by the market, the Fed’s revised dot plot was not. The Federal Reserve’s forecast for rates (green line below) was well above the futures market expectations. Thus, asset prices continued...
