ETHTF (Core Strategy Rebalance)
Macro Has Been Winning the Battle
Last week, we advanced the idea that the recent decline in volatility might be traced to two competing forces: (1) positive industry-specific tailwinds and (2) negative macro headwinds. Additionally, the recent dip in macro correlations could be attributed to unique catalysts, notably the BlackRock ETF application.
Our thinking was that without further industry-specific catalysts, traditional macro correlations would likely return. As evidenced by the charts below, this appears to be the case, with a positively correlated relationship to equities and a negatively correlated relationship to the DXY returning, at least for now.
The recent weakness in prices is certainly disconcerting. Rates look like they do not have a ceiling (they will, eventually).
And the dollar, as the cleanest dirty shirt in the fiat laundry is exhibiting continued strength.
Further, global liquidity, as measured by the size of the balance sheets for the top 4 central banks (Fed, PBOC, BOJ, ECB) is down to levels last seen in mid-September of last year.
The Floodgates Open (Momentarily)
The one thing we were sure of was that volatility could not simply drift lower forever. The unknown was the direction that underlying asset...Reports you may have missed
CORE STRATEGY Most of the risks that prompted us to turn cautious in early February still persist, so we believe it’s right to remain patient. However, the near-term (2–4 weeks) setup is starting to look compelling for a tactical rally as sentiment is miserable, liquidity conditions are improving on the margin, a lot of risk has already been priced in, and we’ve seen serious capitulation and deleveraging. All eyes will...
MSTR Reloading Presents Opportunity for Bounce, But Broader Picture Remains the Same
CORE STRATEGY There is a chance that MSTR flows spark a short-term bounce here, but assets further out on the risk curve continue to face headwinds from ongoing uncertainty surrounding trade and monetary policy. Although the current administration takes a pro-crypto stance, there appears to be no immediate catalyst to revive market enthusiasm. We still anticipate that crypto will outperform this year, but until we see further progress on trade/monetary...
CORE STRATEGY With lingering trade war talks and robust economic data dissuading a dovish Fed pivot, we think the potential for downside volatility remains elevated. While regulatory developments and institutional adoption continue to bolster the medium- to long-term outlook, no immediate “good news” seems likely. Nevertheless, we still expect crypto to outperform this year. Until we see flows return to crypto, raising cash/trimming altcoin positions appears prudent (BTC dominance higher)....
CORE STRATEGY With the looming threat of an escalating trade war and economic data robust enough to discourage a more dovish Fed stance, we believe the upside risk for the DXY and yields has increased in Q1. Moreover, the market remains highly volatile and headline-driven, inhibiting the crypto market from gaining meaningful momentum. While regulatory developments are a key medium- to a long-term tailwind for crypto, it is unlikely that...