Competing Forces

Aug 10, 2023 • 5 Min Read

Macro Headwinds vs. Idiosyncratic Tailwinds

In our prior notes, we highlighted the market's prevailing sideways trend. Over much of the past month, both BTC and ETH have exhibited remarkable stability, moving within a narrow range. Their realized and implied volatilities are nearing all-time lows.

The chart in this report is only accessible to members

We've also emphasized the waning correlation between Bitcoin's daily returns and macro assets such as tech stocks and the US dollar index. These correlations have approached zero across most timeframes.

The chart in this report is only accessible to members

This market seems caught in “no man’s land,” pinned by contrasting forces. On one side, macro indicators are pressuring a potential price dip. Conversely, a stream of positive catalysts favoring crypto has emerged.

Nestled between these countering forces, BTC remains steady, swaying between $28k and $30k.

Consider the following chart that captures a telling example of catalyst-driven rally squashed by a local top in market liquidity.

The chart below shows a bitcoin rally that spanned from March to early April, instigated by the regional banks' meltdown, paving the way for friendlier short-term liquidity conditions in the banking sector. Given Bitcoin's sensitivity to market liquidity conditions, ...

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