02/07 - Macro for Humans
Market Overview
Headline
Bitcoin Stumbles as Stock Market Surges: A Tale of Two Asset Classes
Summary
Bitcoin has taken a significant hit over the past two weeks, breaking key support levels. Meanwhile, the S&P 500 is showing strength, and rising Treasury yields suggest a shift in risk appetite. This divergence is creating a complex trading environment for crypto enthusiasts.
Mood
It's like we're at a party where stocks are dancing on the tables, but Bitcoin is sitting in the corner nursing a hangover.
What Changed Recently
The most striking shift is Bitcoin's sharp decline contrasted against the S&P 500's continued climb. This suggests a potential rotation out of crypto and into traditional equities.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has maintained its bullish trend, gaining nearly 2% today. This strength in equities might be pulling some investment away from crypto, especially as Bitcoin struggles.
Dollar
The US Dollar has weakened over the past week, which would typically support Bitcoin. However, BTC's failure to capitalize on this suggests other bearish factors are at play.
Interest Rates
Treasury yields have been creeping up, forming an ascending triangle pattern. This subtle shift is making 'risk-free' returns more attractive, potentially sapping some demand from the crypto market.
Bitcoin Dominance
Bitcoin dominance has remained relatively stable over the past week, indicating that Bitcoin's troubles aren't necessarily benefiting altcoins either.
Vs 14 Days Ago
Stocks
The stock market's bullish trend has solidified over the past two weeks, creating a stark contrast to Bitcoin's decline. This divergence suggests a broader shift in risk appetite favoring traditional equities.
Dollar
The dollar's bearish trend has become more pronounced over two weeks. Typically, this would boost Bitcoin, making its decline even more notable and suggesting crypto-specific bearish factors.
Interest Rates
The uptrend in yields has become more established, reflecting expectations of 'higher for longer' interest rates. This evolving narrative is reshaping the broader investment landscape, generally pressuring speculative assets like crypto.
Bitcoin Dominance
While Bitcoin dominance hasn't changed dramatically, its failure to increase during BTC's price drop suggests the entire crypto market is facing headwinds.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Right now, it looks like money is leaving both Bitcoin and altcoins. It's less about rotation within crypto and more about funds potentially exiting the crypto space altogether.
Hot Sectors
In this bearish environment, stablecoins and some DeFi protocols focused on yield generation are seeing increased interest as traders seek to preserve capital.
Volume And Activity
Trading volume has spiked, particularly for Bitcoin. However, this appears to be driven by selling pressure rather than enthusiastic buying, suggesting low conviction in a quick recovery.
Key Shifts
Week Over Week
The most significant change is the acceleration of Bitcoin's downtrend, breaking key support levels that had held for months.
Two Week Trend
Over two weeks, we've seen a clear shift from consolidation to a defined bearish trend in Bitcoin, while the stock market has continued its upward trajectory.
Notable Reversals
The relationship between Bitcoin and dollar weakness appears to have decoupled, with BTC failing to benefit from the dollar's decline as it typically would.
What This Means For Traders
If Youre Bullish
- Look for signs of selling exhaustion, such as a bullish divergence on the RSI or a high-volume reversal candle
- Wait for Bitcoin to reclaim the nearest EMA (likely the 10 or 20-day) before considering long positions
- Consider scaling into positions slowly rather than going all-in, as the overall trend remains bearish
If Youre Bearish
- The trend is your friend right now, but be cautious of oversold bounces
- Watch for failed rallies that don't reclaim key EMAs as potential short entry points
- Keep an eye on the stock market – any weakness there could accelerate crypto selling
If Youre Uncertain
- Cash is a position too – there's no shame in sitting on the sidelines until the picture clarifies
- Focus on Bitcoin's reaction to the recent lows – a bounce here could signal a short-term bottom
- Watch for a potential shift in the stock market's trend, as this could be a leading indicator for crypto
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, range-bound strategies were viable. Now, trend-following approaches (especially to the downside) are more appropriate.
From 14d Ago
Two weeks ago, many were anticipating a bullish breakout. That narrative has completely reversed, requiring a shift to capital preservation and cautious positioning.
Current Best Opportunities
Short-term traders might look for oversold bounces to scalp, while longer-term players could start scaling into positions if we see signs of selling exhaustion.
Approaches To Avoid
Avoid trying to catch a falling knife or using high leverage in this volatile environment. Blind dip-buying strategies that worked in the bull market are dangerous right now.
Timing Considerations
Shorter timeframes (1-4 hours) might offer cleaner setups for now, as the daily trend is firmly bearish. Be prepared for increased chop and false moves.
Key Levels To Watch
Critical Thresholds
For Bitcoin, the recent low is now critical support. A break below could trigger another leg down. For the S&P 500, watch the 7000 level as a psychological barrier.
Recent Breakouts
Bitcoin has broken below several key support levels, including the 200-day EMA, which is significant.
Approaching Tests
The 10-year Treasury yield is approaching 4.35%, a break above which could signal further pressure on risk assets.
Final Advice
Main Takeaway
Respect the bearish trend in crypto but be prepared for potential trend-reversal setups, especially if broader market conditions shift.
Biggest Change
The complete sentiment flip in Bitcoin from consolidation to clear downtrend is the most significant shift from two weeks ago.
Risk Reminder
In rapidly changing markets, capital preservation is key. It's okay to miss some moves in order to avoid big drawdowns. Stay nimble and be ready to adapt as conditions evolve.