Volatility Takes a Holiday Vacation
Onto Next Year
Our last weekly strategy note of the year is going to be a brief one. I want to thank everyone for turning to us for timely and actionable research on crypto throughout this year. It was undoubtedly a trying time for the industry. We witnessed a period of reckoning that will leave the space better off over the long term. We will be back in the new year with our outlook for 2023, and perhaps a surprise that we think will help our clients and subscribers manage crypto risk much more effectively.
Now for a few interesting insights worth paying attention to heading into year-end, most of which suggest we are on the brink of finally resolving this year-long plunge downwards.
Volatility on the Decline
If you merely paid attention to equities over the past week, you might be surprised when you shifted your view back to crypto, only to see that the coins had not budged, despite substantial swings in major equity indices.
Below we can see that annualized 30-day realized volatility has fallen off a cliff since the FTX-driven liquidations in early November. Conversely, SPX volatility has steadily climbed higher, continuing a trend that began over a year ago.
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CORE STRATEGY: FOCUS ON MAJORS, KEEP HEAD ON SWIVEL UNTIL BONDS/DXY RELENT We think it's right to expect a bounce into year-end, potentially starting tomorrow if PCE data comes in soft. In our view, this cycle is far from over, but until bonds find a bottom and the USD tops, it’s likely best for the more tactical investor to stay nimble and prepared for opportunities upon confirmation of this trend...
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