A Tale of Two Markets

May 26, 2023 • 9 Min Read

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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Additionally, in the past week, we have observed that gold has begun to exhibit a similar pattern to that of bitcoin. As depicted in the chart above, gold seems to be rolling over in a manner reminiscent of bitcoin's move...

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