Flight to Quality
The Bid We’ve Been Waiting For
Last week, we painted a picture of a market on the cusp of a potential rally. Our thesis hinged on a confluence of favorable factors: a local peak in rates, a possible global liquidity turnaround, and encouraging seasonality trends. However, the market remained largely inert, a phenomenon we attributed to the uncertainty surrounding the SEC's potential stance on Grayscale. The market had been in a holding pattern, with high-volume BTC traders preferring GBTC over spot BTC to mitigate directional price risk, likely also hedging their bets by shorting the futures market.
GBTC and ETHE Rallies
This week marked a notable shift. Both GBTC and ETHE witnessed impressive rallies, with GBTC's discount momentarily dipping to 8% before rebounding to the 12-14% range. The market seemed to finally respond to the catalysts we identified, breaking the inertia, and injecting fresh buying interest into the spot BTC market.
Bitcoin too played its part, rallying in the overnight hours of Sunday to crest above $28,000, a significant level that aligns with its 200-day moving average. This level also holds psychological importance, acting as a trading fulcrum around which market sentiment tends to pivot.
In a dramatic twist, a spurious tweet from Co...Reports you may have missed
CORE STRATEGY: REMAINING TACTICALLY CAUTIOUS, TGA RUNDOWN + EARLY JAN FLOWS COULD PRODUCE NEEDED SPARK In our view, this cycle is far from over. However, until bonds find a bottom and the USD peaks, it’s prudent for more tactically-minded crypto investors to remain nimble and ready to capitalize on opportunities once a trend reversal is confirmed. While this could happen as early as next week due to early-January inflows, additional...
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...