02/15 - Macro for Humans

Market Overview

Headline

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

Summary

Bitcoin's facing unexpected pressure despite a weakening dollar, while stocks hold steady and bond yields plummet. This unusual combination is creating a complex trading environment with both risks and opportunities.

Mood

The market feels like a tug-of-war between conflicting forces. There's uncertainty in the air, but also a sense that big moves could be brewing.

What Changed Recently

Bitcoin's sudden bearish turn is the biggest surprise, breaking its usual inverse relationship with the dollar. Meanwhile, the sharp drop in bond yields suggests growing economic concerns.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

Stocks are holding relatively steady compared to last week, providing a stable backdrop for crypto. This suggests the Bitcoin selloff might be crypto-specific rather than a broader risk-off move.

Dollar

The dollar has weakened noticeably over the past week, which would typically boost Bitcoin. The fact that it hasn't highlights unusual selling pressure in the crypto market.

Interest Rates

Bond yields have dropped significantly in just a week, pointing to a major shift in economic expectations. This could eventually support crypto as investors seek alternative assets.

Bitcoin Dominance

Bitcoin dominance has barely budged in a week, suggesting the current selloff is affecting the broader crypto market, not just Bitcoin.

Vs 14 Days Ago

Stocks

The S&P 500 is largely unchanged from two weeks ago, maintaining a cautiously bullish trend. This stability in traditional markets makes crypto's volatility stand out even more.

Dollar

The dollar's decline has accelerated over the past two weeks, creating a backdrop that should theoretically support crypto prices. The fact that it isn't raises questions about crypto-specific factors at play.

Interest Rates

The two-week view shows a dramatic plunge in bond yields, signaling a major shift in the macroeconomic landscape. This could eventually drive more interest in crypto as a hedge against economic uncertainty.

Bitcoin Dominance

Bitcoin dominance has slipped slightly over two weeks, hinting at a gradual shift towards altcoins despite the overall market pressure.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, it looks like the entire crypto market is under pressure, with Bitcoin leading the way down. This often happens in the early stages of a crypto correction.

Hot Sectors

Defensive plays like stablecoins and low-volatility tokens are seeing increased interest as traders seek shelter from the storm.

Volume And Activity

Trading volume is picking up on downward moves, suggesting there's conviction behind this selloff. However, it's not panic-level volume yet, indicating controlled selling rather than capitulation.

Key Shifts

Week Over Week

The most striking change is Bitcoin's bearish turn despite favorable macro conditions. This suggests either large sellers in the crypto market or a shift in the narrative around Bitcoin's role as a macro hedge.

Two Week Trend

Over the past two weeks, we've seen a clear breakdown of Bitcoin's usual correlations with traditional markets. This divergence often precedes major moves in the crypto market.

Notable Reversals

The sudden flip from bullish to bearish sentiment in Bitcoin is the standout reversal. Just two weeks ago, many were calling for new all-time highs.

What This Means For Traders

If Youre Bullish

• Look for signs of selling exhaustion, such as a bullish divergence on the 4-hour RSI
• Wait for a clear break and retest of the $68,000 support level before considering long entries
• Use smaller position sizes than usual and be prepared to cut losses quickly if support levels fail

If Youre Bearish

• Focus on shorting rallies to key resistance levels rather than chasing the move down
• Watch for a potential bear flag pattern to form, which could offer a high-probability short entry
• Keep an eye on the dollar index – if it suddenly strengthens, it could accelerate crypto's decline

If Youre Uncertain

• Consider trading smaller altcoins against Bitcoin rather than taking USD-denominated positions
• Watch the $65,000 level on Bitcoin closely – a break below could signal much deeper correction
• Look for a potential 'flush' candle with high volume as a sign that the selloff might be exhausting

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, dip-buying was still favored. Now, traders need to be much more cautious about catching falling knives.

From 14d Ago

Two weeks ago, the focus was on riding the uptrend. Now, it's all about protecting capital and looking for signs of a potential trend reversal.

Current Best Opportunities

Swing trading with tight stops looks most favorable right now. The increased volatility offers good risk/reward if you time entries carefully.

Approaches To Avoid

Avoid using high leverage or taking large positions in either direction. The conflicting signals between crypto and traditional markets make big bets especially risky.

Timing Considerations

Shorter timeframes (1h to 4h charts) offer the best opportunities right now. Be prepared to take profits quickly as big moves could reverse suddenly in this choppy environment.

Key Levels To Watch

Critical Thresholds

The $65,000 level on Bitcoin is the big one to watch. A decisive break below could trigger a much larger correction.

Recent Breakouts

Bitcoin breaking below the 50-day EMA is significant and suggests the medium-term trend might be shifting.

Approaching Tests

Keep an eye on the 200-day moving average for Bitcoin, currently around $59,000. A test of this level could be coming if the selloff accelerates.

Final Advice

Main Takeaway

Stay nimble and prioritize capital preservation. This unusual market environment requires extra caution and smaller position sizes.

Biggest Change

The breakdown of Bitcoin's usual correlation with the dollar is the most significant shift. It suggests crypto-specific factors are currently outweighing macro influences.

Risk Reminder

Remember, unusual market conditions like these often precede major moves. Be prepared for increased volatility and consider keeping a larger portion of your portfolio in stable assets until the picture clarifies.