01/22 - Macro for Humans
Market Overview
Headline
Bitcoin Stumbles as Stock Market Surges: A Tale of Two Asset Classes
Summary
Bitcoin is showing weakness while the S&P 500 climbs. The dollar and Treasury yields are rising, suggesting a shift towards risk-on sentiment in traditional markets but caution in crypto.
Mood
It's like the market is at a party where stocks are dancing, but crypto is sitting in the corner, unsure whether to join in.
What Changed Recently
The most notable shift is the divergence between crypto and stocks. Just yesterday, they were moving more in sync.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has gained momentum, up 1.16% today and trending bullish. This risk-on attitude hasn't carried over to crypto, creating an unusual disconnect.
Dollar
The DXY is consolidating around 98.44, slightly higher than a week ago. This subtle strength is adding some pressure to crypto prices.
Interest Rates
The 10-year Treasury yield is showing bullish momentum, breaking out of an ascending triangle. This suggests less appetite for 'safe' assets, which often correlates with crypto pullbacks.
Bitcoin Dominance
Bitcoin dominance is neutral at 59.68%, barely changed from last week. This stability amid price weakness suggests altcoins aren't seeing much relative strength either.
Vs 14 Days Ago
Stocks
Two weeks ago, stocks and crypto were more closely correlated. The recent divergence is a significant shift in market dynamics.
Dollar
The dollar has been gradually strengthening over the past two weeks, contributing to the headwinds facing crypto.
Interest Rates
Bond yields have been on a steady climb for two weeks, reflecting a broader shift away from the 'easy money' narrative that often supports crypto prices.
Bitcoin Dominance
Bitcoin dominance has remained remarkably stable over the past 14 days, hovering around 60%. This suggests the current weakness is market-wide rather than isolated to Bitcoin or altcoins.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Neither Bitcoin nor altcoins are showing particular strength right now. It's like they're both stuck in quicksand while traditional markets party on solid ground.
Hot Sectors
With the overall crypto market struggling, there aren't any standout sectors today. It's a 'risk-off' environment within the crypto ecosystem.
Volume And Activity
Trading volume in crypto is below average and decreasing, suggesting a lack of conviction from buyers. It's like the crypto market is holding its breath, waiting for a catalyst.
Key Shifts
Week Over Week
The most significant change is the decoupling of crypto from traditional risk assets. A week ago, they were moving more in tandem.
Two Week Trend
Over the past 14 days, we've seen a gradual shift from 'crypto as a risk asset' to 'crypto as an uncertain asset' while traditional markets have become more risk-on.
Notable Reversals
The bullish momentum in crypto from early January has notably reversed, with Bitcoin now trading below all major EMAs.
What This Means For Traders
If Youre Bullish
- Look for signs of accumulation, like the current net outflow trend from exchanges
- Wait for a clear break above the 20 EMA (currently around $92,000) before considering long entries
- Use tight stop losses and consider smaller position sizes until the trend clearly reverses
If Youre Bearish
- Short setups look promising, especially on rallies that fail to break above key EMAs
- Watch for a break below $85,000 as confirmation of continued bearish momentum
- Be cautious of potential 'oversold' bounces, especially if traditional markets pull back
If Youre Uncertain
- Consider sitting on the sidelines or trading with very small size until a clearer trend emerges
- Watch the $85,000 to $95,000 range on Bitcoin for a breakout in either direction
- Pay attention to volume – a spike in volume could signal the end of this consolidation phase
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, bullish crypto trades aligned with bullish stock market trades. Now, they're diverging, requiring separate strategies for each market.
From 14d Ago
Two weeks ago, the crypto market had a more positive bias. Now, a defensive approach is warranted, especially in shorter timeframes.
Current Best Opportunities
The clearest opportunities right now are in traditional markets, with a bullish bias on stocks. In crypto, patient bears have an edge, but cautious positioning is key.
Approaches To Avoid
Avoid aggressive long positions in crypto without clear confirmation. The divergence from stocks means 'buy the dip' strategies that worked recently are riskier now.
Timing Considerations
Shorter timeframes in crypto are challenging right now. Consider zooming out to daily and weekly charts for clearer signals, or focus on very short-term scalping if you must trade actively.
Key Levels To Watch
Critical Thresholds
For Bitcoin, $85,000 is crucial support. A break below could accelerate selling. In the S&P 500, watch $6,900 as a key resistance level.
Recent Breakouts
The 10-year Treasury yield breaking out of its ascending triangle is a significant move that could continue to pressure crypto.
Approaching Tests
Bitcoin is approaching a test of the $85,000 support level. How it reacts here could set the tone for the coming weeks.
Final Advice
Main Takeaway
Treat crypto and traditional markets as separate plays right now. What works for stocks may not work for crypto.
Biggest Change
The decoupling of crypto from traditional risk assets is the most significant shift from two weeks ago.
Risk Reminder
In this uncertain crypto environment, capital preservation should be your top priority. It's okay to miss opportunities if it means avoiding big losses.