A Tale of Two Markets
AI Skewing the Picture
Previous observations highlighted how the decline in crypto prices signaled a temporary liquidity peak, potentially tied to the impending debt ceiling deal. Correlations between BTC, gold, and equities illustrated BTC's sensitivity to liquidity changes. As anticipated, BTC/Gold and BTC/equities (excluding AI-related names) correlations are now strengthening, with gold and equities tracking BTC's lead.
Over the past few weeks, our discussions have centered around an observed shift in market dynamics, seemingly prompted by the ongoing debt ceiling standoff and the potential for a resolution in the coming weeks. Recognizing the beginning of a downturn in Bitcoin and the broader crypto market about a month ago, we engaged in conversations regarding raising cash. This decision was informed by the crypto market's tendency to detect alterations in market liquidity conditions ahead of other asset classes. Consequently, it is understandable that there was a delay before gold and the equities market began to perceive impending changes.
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