Nothing Has Changed Except Price
Risk Assets Retreat (For Now)
After several consecutive weeks of bullish price action across risk assets, we have seen markets pull back on both technical exhaustion and underwhelming global economic data.
As we write this note, the global crypto markets have retraced 7.0% over the preceding 24 hours, with the most substantial drawdown occurring in the overnight hours upon the opening of equity markets in Europe. Ongoing concerns over the potential for an impending energy crisis were exacerbated by an elevated German PPI number that shattered analyst expectations.
Beyond this morning’s price action, we have watched all week as rates have moved higher on the back of some hawkish Fed commentary, pushing the dollar higher as well. Below, we see that the $DXY has moved conclusively higher, and without any idiosyncratic bullishness in the crypto markets this week, both BTC and ETH have moved lower with unrivaled synchronicity.
As a reminder, in bitcoin’s short existence, it has had a relatively strong inverse relationship with the DXY. Of course, this makes sense, given it has generally served as beta on risk assets. The chart below features monthly returns since 2015 for DXY and BTC.
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