Soft Landing Back on the Table, Seasonal Headwinds Worthy of Attention
Macro Data Points to a Soft Landing
The global deleveraging event last week was driven by weakening economic expectations and rising fears of a potential policy error by the Federal Reserve. At the height of this uncertainty, the market priced in a 50 bps cut for September, as recession risks took center stage.
However, in just a few days, the narrative has shifted. The market is now leaning back towards a soft-landing scenario rather than one driven by recession fears. Recent economic data has supported this pivot, showing signs of disinflation without signaling an imminent downturn:
- ISM Services PMI: 51.4 vs. 51 forecast
- PPI: 0.1% vs. 0.2% forecast
- Core CPI: 0.17% vs 0.19% forecast
- Retail Sales: 1% vs. 0.3% forecast
As a result, fed funds futures have recalibrated, reducing expectations for cuts from 50 bps to 25 bps.
This suggests that while the Fed is still expected to ease policy, it can afford to do so more gradually. The economy remains stable, inflation is easing, and the urgency for aggressive cuts has lessened.
This is good news for the crypto market. A soft landing implies looser monetary conditions, which in turn expand liquidity and support speculative investments. As we move toward this softer outcome, we believ...Reports you may have missed
CORE STRATEGY Our base case assumes that the macro environment will remain accommodative for crypto through year-end. However, in light of recent market action, we remain alert for signs of a local top (not a cycle top). That said, it is difficult to justify a risk-averse stance at this stage and think it is right to lean into this altcoin rally. Source: TradingView, Fundstrat Source: TradingView, Fundstrat STRONG DOLLAR +...
Today's employment numbers broadly met investor expectations, placating a nervous market. Risk assets rallied, aligning with our view that yesterday's de-risking would not persist through today. Yields continued their downward trajectory, and Fed funds futures also declined, reflecting the market's adherence to the Fed's dovish messaging. Yields Falling: Source: TradingView Fed Funds Futures Showing More Cuts: Source: TradingView Oil prices nearing YTD lows likely assisted in alleviating near-term concerns about...
INDICATIONS OF FROTH Given the violent nature of the past month’s rally, we have been vigilant for signs of a local top. It would be disingenuous to claim that some qualitative "top signals" are not flashing right now. XRP—which we noted as a possible election trade back in October—with only 1–2k daily active addresses (vs ETH's over 400k, source: Artemis), is ripping toward new highs while influencers take to TikTok...
TURNING CAUTIOUSLY OPTIMISTIC There is a lot of pain in the ETHBTC chart. It peaked in December 2021 and, save for several brief rallies, has been on a downwards slope ever since. It peaked at just under 0.09 and currently trades around 0.038. Source: TradingView Fortunately, we have anchored most of our attention on BTC and SOL this cycle, as BTC has continued to lead the market in a generally...
