02/10 - Macro for Humans
Market Overview
Headline
Bitcoin Tumbles as Dollar Weakens: A Puzzling Crypto Conundrum
Summary
Bitcoin has taken a sharp dive despite a weakening dollar, breaking typical correlations. Meanwhile, stocks continue to climb and bond yields are rising, creating a complex landscape for crypto traders.
Mood
The market feels like a rollercoaster that's suddenly changed direction. There's a mix of confusion, opportunity, and caution in the air.
What Changed Recently
Bitcoin's dramatic fall from $93,000 to $70,166 over two weeks is the standout shift, especially given the typically bullish conditions of a weaker dollar.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
Stocks have continued their upward trend, gaining about 0.5% in the past week. This risk-on sentiment usually supports crypto, making Bitcoin's drop even more surprising.
Dollar
The dollar has weakened further, with the DXY showing a clear bearish trend. Normally, this would be a major tailwind for crypto, but Bitcoin isn't following the script.
Interest Rates
Bond yields have climbed 10-15 basis points in two weeks, signaling expectations of higher rates. This could be putting pressure on risk assets like crypto.
Bitcoin Dominance
Bitcoin dominance has remained relatively stable at 59.24%, suggesting the recent sell-off is affecting the entire crypto market, not just Bitcoin.
Vs 14 Days Ago
Stocks
The S&P 500 has maintained its bullish trend over the past two weeks, approaching the psychologically important 7000 level. This stark contrast with crypto's performance is unusual.
Dollar
The dollar's bearish trend has intensified over two weeks, breaking support levels. This divergence from Bitcoin's price action is a significant break from typical correlations.
Interest Rates
The 10-year Treasury yield has seen a notable uptick over two weeks, potentially shifting the risk landscape across assets.
Bitcoin Dominance
Bitcoin dominance has held steady over the past two weeks, indicating that altcoins aren't gaining or losing ground relative to Bitcoin during this downturn.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Neither Bitcoin nor altcoins are attracting significant inflows right now. It appears traders are moving to the sidelines or exiting crypto positions entirely.
Hot Sectors
With the overall market downturn, there are no standout hot sectors in crypto today. Defensive plays and stablecoins might be seeing increased interest.
Volume And Activity
High volume accompanying Bitcoin's drop suggests strong conviction in the selling pressure, at least in the short term.
Key Shifts
Week Over Week
The most dramatic shift is Bitcoin's failure to capitalize on dollar weakness, breaking a long-standing correlation.
Two Week Trend
We've seen a complete reversal from the bullish momentum of two weeks ago, with Bitcoin shedding over 20% of its value.
Notable Reversals
The decoupling of Bitcoin from dollar weakness is the most significant reversal, challenging many traders' fundamental assumptions.
What This Means For Traders
If Youre Bullish
- Look for signs of capitulation, such as extremely high volume spikes or a sharp V-shaped recovery
- Wait for a clear break and hold above the nearest EMA before entering long positions
- Consider scaling into positions slowly, as we may not have found a bottom yet
If Youre Bearish
- The trend is your friend right now, but be cautious of potential oversold bounces
- Watch for any daily closes above key EMAs as a sign the tide might be turning
- Keep stops tight, as news-driven reversals could be sharp in this uncertain environment
If Youre Uncertain
- Cash is a position too. There's no shame in sitting on the sidelines until the picture clears
- Focus on the $70,000 level for Bitcoin. A strong bounce or breakdown here could set the next major move
- Look for a realignment with dollar weakness as a sign that normal market correlations are returning
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, dollar weakness would have been a clear buy signal. Now, traders need to be much more cautious and wait for confirmation.
From 14d Ago
Two weeks ago, the trend was your friend for longs. Now, the bias has shifted bearish, requiring a complete flip in trading approach.
Current Best Opportunities
Skilled day traders might find opportunities in the increased volatility. For most, capital preservation and patience are key until a clearer trend emerges.
Approaches To Avoid
Avoid trying to catch a falling knife or making large directional bets until Bitcoin shows signs of stabilizing.
Timing Considerations
Shorter timeframes are favored in this choppy environment. Be prepared to take profits quickly and cut losses early.
Key Levels To Watch
Critical Thresholds
The $70,000 level for Bitcoin is crucial. Below this, $65,000 becomes the next major support.
Recent Breakouts
Bitcoin has broken below all major EMAs, suggesting strong bearish momentum.
Approaching Tests
Watch for a retest of the 200-day EMA, currently around $77,000, which could act as strong resistance if price rebounds.
Final Advice
Main Takeaway
Stay defensive and be patient. The unusual break in correlations means we're in uncharted waters.
Biggest Change
The decoupling of Bitcoin from dollar weakness is the most significant shift, requiring a rethink of traditional crypto trading strategies.
Risk Reminder
In times of uncertainty, capital preservation is key. It's okay to miss out on some moves to avoid big losses.