01/12 - Macro for Humans
Market Overview
Headline
Bitcoin Wobbles as Stock Market Surges: A Tale of Two Trends
Summary
Bitcoin is showing weakness despite a strong stock market rally. The dollar is firming up slightly, creating a mixed bag for crypto traders. Interest rates are stable, suggesting a cautious but not panicked market sentiment.
Mood
The market feels like a tug-of-war between optimism in stocks and caution in crypto. It's like watching a party where half the guests are dancing while the other half are nervously checking their watches.
What Changed Recently
Bitcoin has slipped below key support levels, breaking its previous correlation with the rising stock market. This divergence is new and noteworthy.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has continued its upward march, gaining 3.40% in two weeks. This bullish stock sentiment isn't translating to crypto enthusiasm like it usually does, suggesting some crypto-specific concerns are at play.
Dollar
The US dollar has firmed up slightly over the past week. This subtle strength is likely contributing to Bitcoin's struggles, as a stronger dollar often puts pressure on crypto prices.
Interest Rates
Bond yields have stabilized around 4.17%, indicating a neutral interest rate outlook. This stability should be supportive for risk assets like crypto, making Bitcoin's weakness more puzzling.
Bitcoin Dominance
Bitcoin dominance has been consolidating around 59%, showing no clear trend. This suggests the market isn't decisively favoring Bitcoin over altcoins or vice versa in the short term.
Vs 14 Days Ago
Stocks
The stock market's bullish trend has accelerated over the past two weeks, with the S&P 500 approaching the psychologically important $7000 level. Normally, this would be great for crypto, making the current divergence even more striking.
Dollar
The dollar has gained some ground over the past two weeks, moving above short-term moving averages. This shift from weakness to mild strength is likely contributing to headwinds for crypto.
Interest Rates
Interest rates have remained relatively stable over the past two weeks, maintaining a neutral backdrop for risk assets. The lack of major rate moves suggests market sentiment shifts are coming from elsewhere.
Bitcoin Dominance
Bitcoin dominance has been range-bound over the past two weeks, indicating no major shift in the balance between Bitcoin and altcoins. This stability in dominance during Bitcoin price weakness suggests the entire crypto market is under pressure.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Right now, neither Bitcoin nor altcoins are seeing strong inflows. It's like everyone's standing on the sidelines, waiting to see which team will make the first move.
Hot Sectors
With overall crypto weakness, there aren't any standout hot sectors today. Defensive plays and stablecoins might be seeing increased interest as traders seek safety.
Volume And Activity
Trading volume is below average, telling us that conviction is low. It's as if traders are tip-toeing rather than diving in, reflecting uncertainty in the current environment.
Key Shifts
Week Over Week
The most significant change is Bitcoin's failure to rally alongside stocks. A week ago, crypto was holding up better despite dollar strength. Now, Bitcoin is showing weakness even with favorable stock market conditions.
Two Week Trend
Over the past two weeks, we've seen a clear decoupling of crypto from traditional risk assets. While stocks have surged, crypto has struggled, breaking a correlation pattern that had been relatively strong.
Notable Reversals
The most important reversal is Bitcoin's shift from resilience to weakness. Two weeks ago, it was holding steady above $90,000. Now, it's struggling to maintain that level despite a bullish broader market.
What This Means For Traders
If Youre Bullish
- Look for setups where Bitcoin holds support at $90,000 and begins to reclaim its EMAs. This could signal a return to strength.
- Wait for a clear break and hold above $93,000 before considering aggressive long positions.
- Consider scaling into positions slowly rather than going all-in, given the current weakness.
If Youre Bearish
- Potential short setups emerge if Bitcoin breaks decisively below $90,000, with a target near the next major support level.
- Watch for continued divergence between crypto and stock market performance as confirmation of bearish sentiment.
- Be prepared for sudden reversals by using stop losses and taking profits regularly on short positions.
If Youre Uncertain
- Focus on range-bound strategies between $90,000 and $93,000 until a clearer trend emerges.
- Keep an eye on the relationship between Bitcoin and the S&P 500. A return to correlation could signal a directional move.
- Watch Bitcoin dominance closely. A strong move in either direction could indicate whether Bitcoin or altcoins will lead the next trend.
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, mirroring stock market bullishness was a viable strategy. Now, crypto-specific caution is needed even as stocks rally.
From 14d Ago
Two weeks ago, Bitcoin showed resilience above $90,000. The optimal approach has shifted from buying dips to being more selective and cautious with entries.
Current Best Opportunities
The most favorable approach today is to trade the range between $90,000 and $93,000, buying near support and selling near resistance. This allows you to capitalize on short-term moves while the larger trend remains unclear.
Approaches To Avoid
Avoid aggressive trend-following strategies or large directional bets. The market isn't showing enough conviction to support these approaches right now.
Timing Considerations
Shorter timeframes (4h and below) are likely to be more reliable than daily charts in the current choppy environment. Be prepared to be more active in managing positions.
Key Levels To Watch
Critical Thresholds
The $90,000 level for Bitcoin is crucial. A decisive break below could accelerate selling, while holding above keeps bullish hopes alive. For the S&P 500, watch $7,000 as a major psychological level that could impact overall market sentiment.
Recent Breakouts
Bitcoin has broken below its major EMAs, a bearish signal that needs to be reclaimed for bullish momentum to return.
Approaching Tests
The $90,000 support for Bitcoin looks likely to be tested again soon. How it reacts here could set the tone for the coming weeks.
Final Advice
Main Takeaway
Stay nimble and be prepared for either a bounce or a breakdown. The current divergence between crypto and stocks won't last forever, and the resolution could be explosive.
Biggest Change
The most significant shift is Bitcoin's weakness in the face of stock market strength. This unusual divergence demands caution and close attention.
Risk Reminder
In this uncertain environment, position sizing is crucial. Don't let the fear of missing out tempt you into oversized bets. Capital preservation should be your priority until a clearer trend emerges.