Remaining OPtimistic
How We Got Here
Looking back over the past month, we found ourselves stuck in unusual stasis. Macro risks were escalating, and negative seasonality was taking effect, while at the same time, the potential for positive industry-specific tailwinds were knocking on the door. This strange equilibrium led to a decoupling from macro variables, with volatility approaching historical lows.
Our near-term bullish view was predicated on one or both of two things coming to fruition: either (1) liquidity conditions would bottom out (with rates rolling over, DXY declining, and central bank liquidity turning higher), or (2) industry-specific catalysts would emerge (such as a Grayscale verdict, official approval of an ETH ETF, or BTC ETH approval).
Unfortunately, last week the market broke free from its stasis, shifting to the downside. This move was spurred by an overleveraged market that had been waiting for one of the two possible relief scenarios to materialize.
Reports you may have missed
BTC AS A POSSIBLE STRATEGIC RESERVE Last week, we discussed the rising political tailwinds affecting crypto. Despite events earlier in the year that might have suggested a changed stance from the Democratic Party, the political divide over the issue has grown stronger. The GOP has become the party that is undoubtedly more favorable to the industry. The attempted assassination of former President Trump, juxtaposed against a Democratic Party seemingly in...
Gox Wallet Movements Still Present a Risk, But Macro & Politics Keeps Us Allocated Here (Core Strategy Rebalance)
DISCUSSING THE SUPPLY CONCERNS On balance, macro conditions have moved in our favor thus far in early Q3. We have received soft jobs numbers and softer ISM reports, and cooler inflation figures, which have sent rates and the DXY lower. Unfortunately, the mere reveal of imminent sales from the German BKA and the solidification of the Mt. Gox disbursement timeline were not enough to put a bottom in for bitcoin....
LESSONS FROM OPEC We have witnessed a significant market panic partially related to formerly locked BTC hitting the order books. The major sources of supply include:Mt. Gox – 141,686 BTCUS Government – 8,100 BTCGerman Government – 50,000 BTC At current prices, this would equate to over $12 billion in supply. This threat, combined with an inhospitable macro backdrop (rising DXY, higher rate expectations, hawkish Fed), has brought BTC down to...
LDO Risk/Reward Looks Good Here, Immediate-term Macro Picture Still Uncertain (Core Strategy Rebalance)
FLOWS AND SENTIMENT STILL SUBDUED Last week, we received a better-than-expected CPI print, but the DXY continued to move higher due to global weakness and a hawkish Fed. We discussed the risks appearing in the metrics we use to gauge sentiment and flows. The overall lack of follow-through in the crypto market was evident. Volumes, net ETP flows, the Coinbase discount, stablecoin market cap trend, and search interest for key...
