01/23 - Macro for Humans
Market Overview
Headline
Bitcoin Stumbles as Dollar Weakens: A Puzzling Market Shift
Summary
Bitcoin is showing unexpected weakness despite a falling US dollar. Meanwhile, stocks are surging and interest rates are climbing, creating a complex trading environment for crypto.
Mood
The market feels like a seesaw right now – traditional assets are up, but crypto is struggling to find its footing. There's a sense of cautious confusion in the air.
What Changed Recently
The most striking shift is Bitcoin's bearish turn despite conditions that typically support crypto. This disconnect suggests underlying weakness in the crypto market that wasn't apparent yesterday.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
Stocks have continued their upward march, gaining even more momentum. This risk-on sentiment would normally boost crypto, making Bitcoin's weakness particularly concerning.
Dollar
The dollar has weakened significantly, which usually supports Bitcoin prices. The fact that BTC is falling anyway points to crypto-specific issues outweighing macro factors.
Interest Rates
Bond yields have climbed notably, signaling expectations of economic strength. This shift typically reduces appetite for crypto as a hedge, but the effect seems exaggerated in the current market.
Bitcoin Dominance
Bitcoin dominance has remained relatively stable, suggesting the current weakness is affecting the entire crypto market rather than just BTC.
Vs 14 Days Ago
Stocks
The stock market's bullish trend has accelerated dramatically, creating an even starker contrast with crypto's performance. This divergence wasn't present two weeks ago.
Dollar
The dollar's decline has become more pronounced, making Bitcoin's inability to capitalize on this favorable condition even more puzzling compared to two weeks ago.
Interest Rates
The uptrend in bond yields has solidified, representing a significant shift in the interest rate landscape that's putting more pressure on crypto compared to two weeks ago.
Bitcoin Dominance
Bitcoin dominance has seen minimal change over two weeks, indicating that the current market dynamics are affecting Bitcoin and altcoins relatively equally.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Neither Bitcoin nor altcoins are attracting significant inflows right now. It's like the crypto market is holding its breath, waiting for a catalyst.
Hot Sectors
Defensive crypto assets like stablecoins are seeing increased interest as traders seek shelter from volatility.
Volume And Activity
Trading volume is below average and decreasing, suggesting a lack of conviction from both buyers and sellers. It's as if the market is stuck in limbo.
Key Shifts
Week Over Week
The most notable change is Bitcoin's shift from neutral to bearish, despite improving macro conditions. This suggests underlying weakness that wasn't apparent a week ago.
Two Week Trend
Over the past 14 days, we've seen a clear decoupling of crypto from traditional market risk sentiment. Two weeks ago, crypto was moving more in sync with stocks.
Notable Reversals
The relationship between USD weakness and Bitcoin strength has broken down in the past week, representing a significant shift in market dynamics.
What This Means For Traders
If Youre Bullish
- Look for oversold conditions on shorter timeframes as potential entry points
- Wait for a clear break and retest of the $90,000 level before considering larger positions
- Use tight stop losses and consider scaling into positions rather than going all-in at once
If Youre Bearish
- The break below major EMAs offers attractive short entries, especially on rallies
- Watch for failed attempts to reclaim the $90,000 level as confirmation of bearish sentiment
- Be cautious of potential sudden reversals if macro tailwinds finally kick in for crypto
If Youre Uncertain
- Focus on range-bound strategies between $85,000 and $92,000 until a clear trend emerges
- Pay close attention to the relationship between BTC and the dollar index for clues about a potential trend change
- Look for a significant increase in trading volume as a sign that the market is ready to pick a direction
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, neutral strategies were optimal. Now, there's a bearish bias, but with the need for caution due to conflicting macro signals.
From 14d Ago
Two weeks ago, traders could more confidently follow traditional risk-on/risk-off dynamics. Now, crypto requires a more nuanced, crypto-specific approach.
Current Best Opportunities
Short-term trades exploiting oversold bounces or breakdowns from key levels offer the best risk/reward in this uncertain environment.
Approaches To Avoid
Avoid large, directional bets or assuming crypto will follow stock market strength. The usual correlations aren't holding right now.
Timing Considerations
Shorter timeframes (1-4 hours) are more reliable in the current chop. Be prepared to sit on the sidelines more than usual while waiting for clearer setups.
Key Levels To Watch
Critical Thresholds
The $85,000 support is crucial for Bitcoin. A strong break below could accelerate selling. For the S&P 500, watch the $5,000 psychological level as a gauge of overall risk appetite.
Recent Breakouts
Bitcoin breaking below its 20, 50, and 200 EMAs is a significant bearish development that occurred in the past week.
Approaching Tests
The $85,000 support level for Bitcoin and the DXY's recent lows around 97.50 are likely to be tested soon based on current momentum.
Final Advice
Main Takeaway
Stay nimble and don't assume old relationships between crypto, stocks, and the dollar will hold. This is a time for caution and smaller position sizes.
Biggest Change
The breakdown of Bitcoin's usual inverse relationship with the US dollar is the most significant shift, suggesting underlying crypto weakness.
Risk Reminder
In this uncertain environment, capital preservation should be your top priority. It's okay to trade less and wait for clearer signals before making larger commitments.