01/29 - Macro for Humans

Market Overview

Headline

Bitcoin Stumbles as Dollar Weakens: A Surprising Twist in the Crypto Dance

Summary

Bitcoin's bearish trend continues despite a weakening dollar, breaking the usual inverse relationship. Meanwhile, stocks and bond yields are rising, creating a complex landscape for crypto traders.

Mood

The market feels like a tug-of-war between conflicting signals, with traders cautiously eyeing multiple indicators for direction.

What Changed Recently

The most significant shift is Bitcoin's failure to capitalize on dollar weakness, suggesting internal crypto market dynamics are currently outweighing macro influences.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its bullish trend, gaining strength over the past week. This risk-on sentiment in traditional markets isn't currently benefiting crypto, indicating a potential decoupling.

Dollar

The USD has weakened significantly, dropping 2.01% in a week. Normally this would boost Bitcoin, but the lack of positive response suggests crypto-specific bearish factors at play.

Interest Rates

The 10-year Treasury yield is showing bullish momentum, breaking out of an ascending triangle. This shift towards higher rate expectations is creating headwinds for both stocks and crypto.

Bitcoin Dominance

Bitcoin dominance has remained relatively stable around 59-60%, indicating no major shift in the balance between Bitcoin and altcoins over the past week.

Vs 14 Days Ago

Stocks

The S&P 500's bullish trend has accelerated compared to two weeks ago, with the index now well above all key moving averages. This growing appetite for risk hasn't translated to crypto enthusiasm.

Dollar

The dollar's decline has intensified over the past two weeks, potentially signaling a longer-term trend shift. Crypto's lack of positive reaction to this is even more notable in this broader context.

Interest Rates

Bond yields have been steadily climbing over the past two weeks, reflecting a market that's pricing in higher rates for longer. This evolving narrative is reshaping the investment landscape across all assets.

Bitcoin Dominance

Bitcoin dominance has been range-bound between 59-60% for the past two weeks, suggesting a period of relative stability in the internal dynamics of the crypto market.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Neither Bitcoin nor altcoins are showing particular strength right now. Money seems to be flowing out of crypto rather than shifting within it, likely due to more attractive yields in traditional finance.

Hot Sectors

There are no standout hot sectors in crypto today. The overall bearish sentiment is affecting the market broadly.

Volume And Activity

Trading volume in Bitcoin is below average and decreasing, indicating low conviction and a potential lack of new buyers entering the market.

Key Shifts

Week Over Week

The most notable change is Bitcoin's failure to rally despite favorable macro conditions like dollar weakness. This suggests internal crypto market exhaustion or specific concerns weighing on the sector.

Two Week Trend

Over the past two weeks, we've seen a growing divergence between traditional risk assets (rising stocks) and crypto (falling Bitcoin). This could indicate a shift in how investors are approaching digital assets.

Notable Reversals

The usual inverse correlation between Bitcoin and the US Dollar has broken down in the short term, representing a significant shift in market dynamics that traders need to be aware of.

What This Means For Traders

If Youre Bullish

• Look for signs of Bitcoin finding support around $89,000 or $85,000 before considering long positions
• Wait for a clear break and hold above the 20-day EMA before becoming aggressively bullish
• Consider setting tighter stop losses than usual given the conflicting market signals

If Youre Bearish

• Short setups near the $92,000 resistance level could be promising if rejection occurs
• Watch for continued divergence between stocks (up) and crypto (down) as confirmation of bearish crypto-specific factors
• Be prepared for potential sharp reversals if the broader dollar weakness eventually starts to impact crypto positively

If Youre Uncertain

• Focus on range-bound strategies between $89,000 support and $92,000 resistance
• Pay close attention to the relationship between Bitcoin and the Dollar Index (DXY) for signs of normalizing correlation
• Look for a clear break above $95,000 or below $85,000 for stronger directional signals

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, dollar weakness would have been a clear bullish signal for Bitcoin. Now, traders need to be more cautious and look for confirmation from crypto-specific indicators.

From 14d Ago

Two weeks ago, the rising stock market was more closely correlated with crypto performance. The current divergence requires a re-evaluation of how macro trends are impacting digital assets.

Current Best Opportunities

Range-bound trading strategies and careful position sizing are favored in this conflicting environment. Look for short-term reversals at key support and resistance levels.

Approaches To Avoid

Avoid large, directional bets based solely on traditional macro indicators like dollar strength or stock market performance, as these correlations are currently unreliable.

Timing Considerations

Shorter timeframes (1-4 hour charts) may offer clearer setups right now. Be prepared to be more active in managing positions as the market lacks a clear longer-term direction.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $85,000 is a critical support level. A break below could accelerate selling. For the S&P 500, the $7,000 level is an important psychological barrier to watch.

Recent Breakouts

The 10-year Treasury yield breaking out of its ascending triangle is a significant development to monitor for its ongoing impact on risk assets.

Approaching Tests

Bitcoin is approaching a test of the $89,000 support level, which if broken, could lead to a quick move down to $85,000.

Final Advice

Main Takeaway

Stay nimble and don't rely on old assumptions. The crypto market is showing signs of decoupling from traditional macro relationships, requiring a more nuanced approach to trading.

Biggest Change

The breakdown of Bitcoin's usual inverse relationship with the US Dollar is the most significant shift, suggesting internal crypto market dynamics are currently dominating.

Risk Reminder

In this conflicting environment, proper position sizing is crucial. Don't let the potential for a sudden shift in market dynamics catch you overexposed.