02/13 - Macro for Humans
Market Overview
Headline
Bitcoin Tumbles as Dollar Weakens: A Puzzling Crypto Conundrum
Summary
Bitcoin is in freefall despite a weakening dollar, breaking typical correlations. The S&P 500 is consolidating while Treasury yields drop, creating a mixed bag for risk assets.
Mood
The market feels like a rollercoaster that's gone off the rails – exciting for some, terrifying for others, and leaving most people unsure which way is up.
What Changed Recently
Bitcoin's sharp decline is the biggest surprise, diverging from its usual inverse relationship with the dollar. This suggests internal crypto market dynamics are overshadowing broader economic factors.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has weakened but remains in consolidation, providing less support for crypto than a week ago. This neutral stock environment is allowing crypto-specific factors to dominate.
Dollar
The dollar has continued its downtrend, which would typically boost Bitcoin. The fact that it hasn't suggests other bearish forces are at play in the crypto market.
Interest Rates
Treasury yields have dropped further, indicating a 'risk-off' sentiment that's spilling over into crypto more strongly than it was a week ago.
Bitcoin Dominance
Bitcoin dominance has barely budged, showing that this sell-off is affecting the entire crypto market, not just Bitcoin or altcoins specifically.
Vs 14 Days Ago
Stocks
Two weeks ago, stocks were stronger, providing more of a tailwind for crypto. The shift to consolidation has removed this support, leaving crypto more vulnerable.
Dollar
The dollar's decline has accelerated over two weeks. Normally this would be a major boost for Bitcoin, making the current drop even more surprising.
Interest Rates
The two-week trend in falling yields points to growing economic concerns. This 'flight to safety' mentality is now clearly impacting crypto risk appetite.
Bitcoin Dominance
Bitcoin dominance has decreased slightly over two weeks, suggesting a subtle shift towards altcoins that's being overshadowed by the overall market decline.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Money isn't clearly flowing to either Bitcoin or altcoins – it's flowing out of crypto altogether. This suggests broad-based fear rather than rotation between assets.
Hot Sectors
In this bearish environment, stablecoins and some DeFi protocols focused on lending are seeing increased interest as traders seek safety.
Volume And Activity
Trading volume is spiking, indicating panic selling rather than calm profit-taking. This could signal we're approaching a short-term bottom.
Key Shifts
Week Over Week
The most striking change is Bitcoin's failure to capitalize on dollar weakness, breaking a pattern we've seen for months.
Two Week Trend
Over two weeks, we've gone from cautious optimism to outright fear, with each small bounce being sold aggressively.
Notable Reversals
The correlation between Bitcoin and tech stocks has weakened significantly, suggesting crypto is now marching to its own bearish drum.
What This Means For Traders
If Youre Bullish
- Look for signs of selling exhaustion, such as a volume climax or a 'wick' on the daily candle
- Wait for a clear higher low and higher high before entering long positions
- Consider scaling into positions slowly rather than going all-in, as we could see further downside
If Youre Bearish
- Short-term shorts still look promising, especially on rallies to key resistance levels
- Watch for any bounce that fails to reclaim the 20-day EMA as a potential entry
- Be cautious of potential positive news catalysts that could trigger short squeezes
If Youre Uncertain
- Focus on stable coins or reduced position sizes to stay engaged while limiting risk
- Keep an eye on the $60,000 level for Bitcoin as a key psychological support
- An impulsive move back above the 50-day moving average would suggest the worst is over
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, dip-buying was still attractive. Now, waiting for clear reversal signs is crucial before going long.
From 14d Ago
Two weeks ago, the trend was your friend for both day-trades and swings. Now, counter-trend scalps and careful shorts are favored.
Current Best Opportunities
Quick, counter-trend trades during oversold bounces offer the best risk/reward. For longer-term positions, patience in building a portfolio at lower prices could pay off.
Approaches To Avoid
Avoid trying to catch the exact bottom with large positions. This is not the time for 'hero' trades betting on v-shaped recoveries.
Timing Considerations
Shorter timeframes (1-4 hours) are safer for now. Be ready to take profits quickly on any trades, as sustained moves are less likely in this choppy environment.
Key Levels To Watch
Critical Thresholds
For Bitcoin, $60,000 is make-or-break support. For the S&P 500, 6,800 could determine if stocks will provide support or another headwind for crypto.
Recent Breakouts
Bitcoin breaking below $65,000 was significant, as this was seen as strong support. The speed of this breakdown is concerning.
Approaching Tests
The 200-day moving average for Bitcoin (around $58,000) will be a crucial test if the sell-off continues. A bounce there could attract buyers, while a break lower could trigger capitulation.
Final Advice
Main Takeaway
Respect the downtrend, but be ready for a potential bottoming process. This is a time for caution, not panic.
Biggest Change
Bitcoin's disconnect from dollar weakness is the most significant shift, suggesting internal crypto market dynamics are currently more important than macro factors.
Risk Reminder
Volatility cuts both ways – just as the drop was sharper than expected, any bounce could be equally violent. Keep positions sized appropriately for big swings in either direction.