Pressing Winners (Core Strategy Rebalance)

Nov 30, 2023 • 10 Min Read

Rates Due For a Bounce (Maybe)

As the crypto market continues to exhibit strength, and despite eradicating one of the market’s biggest unknowns in Binance just last week, it remains essential to be aware of near-term risks.

Recently, the bond market has experienced a significant rally, and there's been a notable decline in the DXY. Combined with nominal stimulus in Asia, these factors have contributed to a substantial increase in USD global liquidity.

This boost in liquidity has been a driving force behind the expanding breadth in both the crypto market and crypto equities.

Notably, crypto equities began to align more closely with underlying crypto assets when the 10-year bond yield started to decrease.

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If interest rates begin to regress to the mean – perhaps on a strong PMI print tomorrow, or ahead of the next Treasury quarterly refunding announcement, we may bear witness to a reduction in market breadth.

Recall that the overemphasis on bills issuance in the October refunding announcement fueled a good portion of the duration rally in late October and early November, and in our view, contributed to the broadening of the rally in crypto.

A resurgence in rates on the long end of the curve could create short-lived headwinds for altcoins and crypto equi...

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