01/24 - Macro for Humans

Market Overview

Headline

Bitcoin Stumbles as Dollar Gains Strength: A Shifting Landscape for Crypto Traders

Summary

Bitcoin is showing weakness while the broader stock market remains bullish. The strengthening dollar and rising bond yields are creating a challenging environment for crypto, potentially signaling a shift in global risk appetite.

Mood

The market feels like a tug-of-war between optimism in stocks and caution in crypto. It's as if Bitcoin is swimming against the current while other assets ride the wave.

What Changed Recently

The most significant shift is Bitcoin's bearish turn, breaking below key moving averages while the S&P 500 continues to climb. This divergence suggests a potential rotation out of crypto and into traditional assets.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its upward trajectory, gaining about 1.5% over the week. This bullish stock sentiment hasn't translated to crypto, indicating a potential decoupling of Bitcoin from traditional risk assets.

Dollar

The US Dollar has reversed its downtrend, strengthening by about 1% in the past week. This newfound dollar strength is putting pressure on Bitcoin, making it more expensive for international buyers.

Interest Rates

Bond yields have jumped significantly, with the 10-year Treasury yield up 13 basis points. This surge in yields is making 'risk-free' investments more attractive, potentially drawing capital away from crypto.

Bitcoin Dominance

Bitcoin dominance has remained relatively stable around 60%, suggesting the current weakness is affecting the entire crypto market rather than just Bitcoin.

Vs 14 Days Ago

Stocks

The stock market's bullish trend has accelerated over the past two weeks, with the S&P 500 up nearly 3%. This divergence from crypto's performance is notable and may indicate a shift in risk appetite among investors.

Dollar

Two weeks ago, the dollar was in a clear downtrend. Its recent reversal represents a significant shift in forex markets that's rippling through to crypto.

Interest Rates

Bond yields have seen a sharp uptick over the past two weeks, reversing a period of stability. This change suggests markets are adjusting their interest rate expectations, which could have long-term implications for all risk assets.

Bitcoin Dominance

Bitcoin dominance has oscillated within a narrow range, indicating no significant rotation between Bitcoin and altcoins despite the overall market weakness.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, it's less about Bitcoin vs. alts and more about crypto vs. everything else. Both Bitcoin and altcoins are facing similar headwinds as money appears to be flowing out of the crypto ecosystem.

Hot Sectors

In this bearish environment, stablecoins and defensive crypto assets are seeing increased interest as traders look to preserve capital.

Volume And Activity

Trading volume is below average and decreasing, suggesting a lack of conviction among buyers and potentially indicating that we're in a distribution phase where larger holders are slowly selling.

Key Shifts

Week Over Week

The most notable change is Bitcoin's break below key moving averages, signaling a potential trend reversal that wasn't present a week ago.

Two Week Trend

Over the past two weeks, we've seen a clear shift from crypto outperforming traditional markets to underperforming. This change in relative strength is a key trend to watch.

Notable Reversals

The dollar's reversal from bearish to bullish over the past two weeks is perhaps the most significant shift, as it has historically shown an inverse relationship with Bitcoin.

What This Means For Traders

If Youre Bullish

• Look for oversold bounces on strong support levels, particularly around $85,000 for Bitcoin
• Wait for a clear break and close above the 20-day EMA before considering longer-term long positions
• Consider using smaller position sizes and tighter stop-losses to manage increased downside risk

If Youre Bearish

• Short-term traders might look to short rallies that fail at key resistance levels, especially near $95,000
• Watch for decreasing volume on any bounces as a sign that the bearish trend remains intact
• Be prepared for potential sudden reversals by using stop-losses and avoiding overleveraged positions

If Youre Uncertain

• Focus on range-bound trading strategies between key support and resistance levels
• Pay close attention to the $89,000 level for Bitcoin as a break below could accelerate selling
• Watch for a potential bullish divergence on the RSI, which could signal a trend reversal

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, dip-buying was still a viable strategy. Now, traders should be more cautious about catching falling knives and consider waiting for clear reversal signals.

From 14d Ago

Two weeks ago, the crypto market was showing strength relative to traditional assets. That edge has disappeared, requiring a more defensive approach to trading.

Current Best Opportunities

The most favorable approach today is to focus on capital preservation and high-probability setups. Look for oversold bounces in Bitcoin near strong support levels, but be prepared to take profits quickly.

Approaches To Avoid

Avoid aggressive long positions or attempts to call the bottom without clear confirmation. The market is showing signs of distribution, so 'buy and hold' strategies are riskier than usual.

Timing Considerations

Short-term trades and quick profit-taking are favored in this environment. Be prepared to sit on the sidelines more often and wait for clearer setups.

Key Levels To Watch

Critical Thresholds

The $85,000 support for Bitcoin is crucial. A break below could trigger a much larger sell-off. For the S&P 500, watch the 7,000 level as a potential top.

Recent Breakouts

Bitcoin breaking below the 50-day EMA is significant and suggests further downside is possible if this level isn't quickly reclaimed.

Approaching Tests

The $85,000 support for Bitcoin and the 7,000 resistance for the S&P 500 are likely to be tested in the coming days based on current momentum.

Final Advice

Main Takeaway

Prioritize capital preservation and be prepared for increased volatility. The crypto market is showing signs of weakness while traditional markets remain strong, creating a challenging trading environment.

Biggest Change

The most significant shift is the decoupling of crypto performance from traditional risk assets, breaking the correlation we've seen in recent months.

Risk Reminder

Remember, markets can change quickly. Don't let bearish sentiment cloud your judgment – stay flexible and be ready to adapt if conditions shift again.