01/25 - Macro for Humans

Market Overview

Headline

Bitcoin Stumbles as Stock Market Climbs: A Tale of Two Trends

Summary

Bitcoin is showing weakness, trading below key levels while the S&P 500 continues its upward march. The dollar is losing ground, potentially easing pressure on risk assets, but crypto isn't benefiting yet.

Mood

It's like we're at a party where stocks are dancing, but crypto is sitting in the corner, unsure whether to join in or go home.

What Changed Recently

Bitcoin's bearish momentum has intensified, dropping below all major moving averages. Meanwhile, the S&P 500 has maintained its bullish trajectory, widening the performance gap between traditional and crypto markets.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its upward climb, potentially drawing some investor attention away from crypto. This divergence suggests a temporary disconnect between traditional and digital asset risk appetites.

Dollar

The US Dollar has weakened over the past week, which typically supports crypto prices. However, Bitcoin isn't responding positively yet, indicating other factors are overshadowing this usually bullish catalyst.

Interest Rates

Bond yields have trended higher, reflecting reduced expectations for near-term rate cuts. This shift in the interest rate landscape is creating a more challenging environment for risk assets like crypto.

Bitcoin Dominance

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

Vs 14 Days Ago

Stocks

The stock market's bullish trend has become more pronounced over the past two weeks, potentially siphoning some speculative capital away from the crypto space.

Dollar

The dollar's bearish momentum has accelerated compared to two weeks ago, which should theoretically support Bitcoin prices. The lack of positive response from crypto highlights the current bearish sentiment.

Interest Rates

The shift in interest rate expectations has been more dramatic over a two-week view, with markets now pricing in a more hawkish Fed outlook. This evolving narrative is creating headwinds for crypto.

Bitcoin Dominance

Bitcoin dominance has shown minimal change over two weeks, indicating a broad market cooldown rather than rotation between Bitcoin and altcoins.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, it's less about Bitcoin vs. alts and more about the entire crypto market struggling. It's like everyone in crypto is stuck in the same leaky boat.

Hot Sectors

With the overall market weakness, there aren't any standout hot sectors. Defensive plays and stablecoins might be seeing increased interest as traders seek safety.

Volume And Activity

Trading volume is below average and decreasing, suggesting a lack of conviction from buyers. It's as if traders are standing on the sidelines, waiting to see which way the wind blows.

Key Shifts

Week Over Week

The most significant change is Bitcoin's failure to hold above key moving averages, signaling a potential shift from consolidation to a more defined downtrend.

Two Week Trend

Over the past 14 days, we've seen a clear divergence emerge between crypto and traditional markets, with stocks continuing to climb while Bitcoin loses ground.

Notable Reversals

The optimism surrounding potential interest rate cuts has reversed, with markets now adjusting to a more hawkish Fed outlook. This shift has dampened risk appetite in the crypto space.

What This Means For Traders

If Youre Bullish

• Look for signs of accumulation at key support levels, particularly around $85,000 and $82,500 for Bitcoin
• Wait for a clear break and hold above the 20-day EMA before considering new long positions
• Use tight stop losses and consider scaling into positions rather than going all-in at once

If Youre Bearish

• Short setups look promising on rallies that fail to break above the 20-day EMA
• Watch for increasing volume on down days as confirmation of bearish momentum
• Be prepared for potential bounces at key support levels and consider taking partial profits

If Youre Uncertain

• Focus on range-bound strategies between key support and resistance levels
• Keep an eye on the relationship between crypto and stock market performance for signs of re-coupling
• Watch for a potential shift in Fed rate expectations, which could quickly change market dynamics

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, consolidation strategies were favored. Now, trend-following bearish approaches are gaining an edge as Bitcoin breaks below key levels.

From 14d Ago

Two weeks ago, there was more optimism around potential rate cuts supporting crypto. That narrative has shifted, requiring a more cautious approach to bullish setups.

Current Best Opportunities

Short-term bearish trades and range-bound strategies between key support and resistance levels offer the best risk-reward in the current environment.

Approaches To Avoid

Avoid aggressive bullish positions or trying to catch a bottom without clear confirmation of a trend reversal.

Timing Considerations

Shorter timeframes are favored in this choppy environment. Be prepared to act quickly as key levels are tested.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $85,000 is a crucial support level. A strong bounce here could signal a potential trend reversal, while a clear break below could accelerate selling.

Recent Breakouts

Bitcoin breaking below its 200-day EMA is a significant bearish development that occurred in the past week.

Approaching Tests

The S&P 500 is approaching the psychologically important 7,000 level, which could impact overall market sentiment if tested.

Final Advice

Main Takeaway

Stay defensive and nimble. The crypto market is showing weakness while facing headwinds from shifting macro expectations.

Biggest Change

The most significant shift is the decoupling between crypto and stock market performance, suggesting a unique set of challenges for digital assets.

Risk Reminder

In this environment of heightened uncertainty, position sizing is crucial. Don't let the fear of missing out lead to overleveraging – there will always be new opportunities.