Much Wow
Coins Do Not Care About EPS
As we have addressed over the past month, cryptoassets were nonreactive to the onslaught of gruesome tech earnings this week. At the time of writing, bitcoin, ether, and the rest of the crypto ecosystem have vastly outpaced the Nasdaq.
As we can see below, a major contributing factor to crypto doing so well is yields rolling over for the first time since early October.
Some questions that remain now are:
- How much relief will we see over the rest of this quarter?
- How much will crypto’s relative strength be able to avoid any periodic uplift in rates?
If we get a prolonged drawdown akin to the one that we saw from June through August, it is possible that we see a rather aggressive rally to the upside through year-end.
The chart below frames the recent magnitude of the pullback in rates relative to global interest rates via the pullback in the dollar. This chart displays the deviation of the $DXY from its 50-day moving average. Clearly, we have seen a relatively sharp drawdown recently.
Interestingly, throughout this year, we have witnessed this metric drop sharply on several occasions, but this appears to be the most extreme deviation from this moving average since the beginning of this year.
Source: Fundstrat, Tradin...Reports you may have missed
CORE STRATEGY: FOCUS ON MAJORS, KEEP HEAD ON SWIVEL UNTIL BONDS/DXY RELENT We think it's right to expect a bounce into year-end, potentially starting tomorrow if PCE data comes in soft. In our view, this cycle is far from over, but until bonds find a bottom and the USD tops, it’s likely best for the more tactical investor to stay nimble and prepared for opportunities upon confirmation of this trend...
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...
