The Path Forward (Core Strategy Rebalance)
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, investors often sell what they can when they can to meet their obligations. Crypto, which remains open for business 24/7, makes it an accessible source of liquidity during trying times.
For those speculating whether this marks a cycle top, it's important to clarify that we do not see it as such.
The current market dynamics reflect systematic deleveraging across risk assets, influenced by political uncertainty (tightening presidential race), geopolitical tensions (escalating Middle East conflict), economic concerns (potential Fed policy error), and heightened volatility in FX markets (surprise BOJ rate hike causing yen carry trade unwind).
Crypto cycles should be analyzed through the lens of global liquidity. In the short term, prices might be influenced by leveraging/deleveraging, but in the medium to long term, factors like real interest rates, banking r...