How the US Could Adopt BTC as a Strategic Reserve Asset, Look for ETH to Bottom Within Next Few Trading Days
Political Prediction Markets Provide Partial Rationale for Pause in Rally
We see the recent pause in the July rally driven by two factors:
- General Degrossing Across All Asset Markets: The past couple of days have seen degrossing across all asset markets, including the crypto markets. This is less crypto-specific and more of a function of the market rotating out of strategies (like the long MAG 7) that worked in the first half of the year but might not continue to be favored going forward. The IWM/QQQ chart below illustrates the shock that equity markets have experienced over the past few days. Once broader asset markets regain their footing, which could come as early as Friday’s PCE report, this should be less of a concern for crypto markets.
- Political Developments: Since President Biden has withdrawn from the race and Kamala Harris has become the presumptive Democratic nominee, betting markets have repriced the Democratic odds of victory higher. While the current outlook remains net positive for the GOP, this mitigates some of the Trump trade tailwinds for price that we have been discussing recently. It is likely that we will continue to see some volatility on this front through November.
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Caution in the Near-term Still Warranted, Q4 Setup Remains Compelling (Core Strategy Rebalance)
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LOWER VOLUMES PERSIST Earlier this week, we witnessed approximately $2B in open interest being unwound within a matter of hours—a significant forced deleveraging event for an otherwise uneventful Tuesday, lacking a clear catalyst. In our view, the selloff was largely technical and indicative of the negative seasonality we've been discussing recently. To backtrack, Monday and Tuesday followed a dovish Fed pivot at Jackson Hole, sparking a sharp rally in soft-landing...
WHAT HAPPENED We won't spend time diving deeply into the events of the past few days as most are likely already familiar. In short, concerns about a potential domestic recession were ignited last Friday following a weak jobs report. This caused the dollar, particularly the USDJPY, to decline, triggering an unwinding of the yen carry trade and leading to widespread deleveraging across global markets. During such a global margin call,...
Shifting Election Odds Erases “Trump Premium,” but it Remains Difficult to Be Bearish Amid Falling Rates and Dollar
IDEAL FOMC OUTCOME This week's events have been a reminder that while macro factors can align favorably, idiosyncratic elements can sometimes complicate the picture. On Wednesday, the Federal Reserve decided to hold interest rates steady until September. Notably, the FOMC statement emphasized the Fed's dual mandate, a significant shift from previous communications. Fed Chair Jerome Powell expressed a dovish stance, indicating a potential openness to rate cuts in September, contingent...
