01/28 - Macro for Humans
Market Overview
Headline
Crypto Caution: Bitcoin Slips as Traditional Markets Show Strength
Summary
Bitcoin is facing headwinds as traditional markets rally and Treasury yields climb. This divergence suggests a shift in risk appetite that's putting pressure on crypto assets.
Mood
The market feels like a tug-of-war between optimistic stock traders and cautious crypto investors. There's a sense of uncertainty in the air, like everyone's waiting for the other shoe to drop.
What Changed Recently
The most notable shift is Bitcoin's bearish turn while stocks continue to climb. This decoupling is raising eyebrows and causing some traders to reassess their crypto positions.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
Stocks have continued their upward march, gaining strength over the past week. This optimism hasn't carried over to crypto, creating a concerning divergence for Bitcoin bulls.
Dollar
The dollar has weakened significantly in the past week, which would typically support Bitcoin. The fact that BTC is falling despite dollar weakness is a red flag.
Interest Rates
Treasury yields have climbed over the past week, suggesting markets are pricing in delayed rate cuts. This shift is making the opportunity cost of holding crypto less attractive.
Bitcoin Dominance
Bitcoin dominance has remained relatively stable over the past week, indicating the current weakness isn't isolated to BTC but is affecting the broader crypto market.
Vs 14 Days Ago
Stocks
The stock market's bullish trend has accelerated over the past two weeks, widening the performance gap with crypto. This divergence is more pronounced than it was 14 days ago.
Dollar
The dollar's decline has intensified over the past two weeks, yet crypto hasn't benefited. This break from the usual inverse relationship is a significant shift from earlier this month.
Interest Rates
Bond yields have risen more sharply over the two-week period, reflecting a growing consensus that rate cuts may come later than previously expected. This evolving narrative is weighing on crypto sentiment.
Bitcoin Dominance
Bitcoin dominance has seen minimal change over two weeks, suggesting the market hasn't decisively shifted towards either Bitcoin or altcoins during this period of weakness.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Right now, it looks like the tide is going out for both Bitcoin and altcoins. There's no clear rotation happening – instead, we're seeing broad-based selling pressure across the crypto market.
Hot Sectors
In this risk-off environment, stablecoins and defensive crypto assets are seeing increased interest. Traders are battening down the hatches rather than chasing high-risk plays.
Volume And Activity
Trading volume is decreasing, telling us that conviction is low. It's like the crypto market is holding its breath, waiting to see if this dip will attract buyers or lead to a larger selloff.
Key Shifts
Week Over Week
The most important change this week is Bitcoin's failure to benefit from dollar weakness. This suggests underlying selling pressure that's overriding typical market relationships.
Two Week Trend
Over the past two weeks, we've seen a clear decoupling of crypto from traditional risk assets. While stocks have continued higher, crypto has lost momentum and turned bearish.
Notable Reversals
The most significant reversal is in market sentiment. Two weeks ago, there was optimism about potential rate cuts boosting crypto. Now, that narrative has shifted, and traders are more cautious.
What This Means For Traders
If Youre Bullish
- Look for setups near strong support levels, especially around $90,000 and $88,000 for Bitcoin
- Wait for a clear bounce and increased volume before entering long positions
- Consider using options strategies to limit downside risk while maintaining upside exposure
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 support at psychological levels like $90,000 – don't get greedy with targets
If Youre Uncertain
- Focus on range-bound strategies between support at $88,000 and resistance at $95,000
- Pay close attention to the relationship between crypto and traditional markets for signs of re-coupling
- Look for a clear break above $95,000 with strong volume as a signal that the bearish trend may be ending
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, dip-buying was still a favored strategy. Now, traders need to be more cautious about catching falling knives and should wait for clearer signs of support.
From 14d Ago
Two weeks ago, the focus was on positioning for potential upside from rate cut expectations. Today, the emphasis is on capital preservation and managing downside risk.
Current Best Opportunities
The most favorable approaches right now involve cautious, range-bound trading and capitalizing on short-term oversold bounces while maintaining a defensive overall stance.
Approaches To Avoid
Avoid aggressive long positions or attempts to call a bottom without clear confirmation. This isn't the time for 'hero' trades trying to pick the exact low.
Timing Considerations
Shorter timeframes are favored in this choppy environment. Be prepared to take profits quickly on any bounces, and don't let winning trades turn into losers.
Key Levels To Watch
Critical Thresholds
The $90,000 level for Bitcoin is crucial – a solid bounce here could restore some confidence, while a decisive break below could accelerate selling
Recent Breakouts
Bitcoin breaking below its 20-day EMA is a significant bearish development that occurred in the past week
Approaching Tests
The 50-day moving average around $87,500 for Bitcoin could be tested soon if current weakness persists
Final Advice
Main Takeaway
Stay defensive and prioritize capital preservation until we see a clear shift in momentum or a re-coupling with traditional risk assets
Biggest Change
The most significant change is the breakdown of typical market correlations, with crypto weakening despite a falling dollar and rising stocks
Risk Reminder
In this uncertain environment, position sizing is crucial. Don't let the fear of missing out lead you to take oversized risks – there will always be another opportunity