02/17 - Macro for Humans

Market Overview

Headline

Crypto Caution: Bitcoin Stumbles as Stock Market Climbs

Summary

Bitcoin is showing weakness despite a bullish stock market, creating a mixed bag for crypto traders. The US dollar is weakening, potentially offering some support for digital assets, but overall sentiment remains cautious.

Mood

The market feels like a tug-of-war between optimism from traditional finance and growing unease in the crypto space.

What Changed Recently

Bitcoin has broken below key support levels, diverging from the positive trend in stocks. This shift suggests a potential change in the crypto market's risk appetite.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its upward trajectory, gaining strength over the past week. This bullish stock sentiment hasn't translated to crypto, indicating a potential decoupling of Bitcoin from traditional markets.

Dollar

The US dollar has weakened notably in the past week. Typically, this would be bullish for crypto, but Bitcoin's failure to capitalize on this weakness is a concerning sign.

Interest Rates

Bond yields have dropped sharply, suggesting expectations of lower interest rates. This should create a more favorable environment for risk assets like crypto, making Bitcoin's current weakness even more puzzling.

Bitcoin Dominance

Bitcoin dominance has remained relatively stable over the past week, hovering around 59%. This suggests the current weakness is affecting the entire crypto market, not just Bitcoin.

Vs 14 Days Ago

Stocks

The stock market's bullish trend has strengthened considerably over two weeks. The growing divergence between stocks and crypto over this period is notable and could signal a shift in investor risk preferences.

Dollar

The dollar's bearish trend has intensified over the past two weeks. The fact that crypto hasn't benefited from this sustained dollar weakness is a red flag that shouldn't be ignored.

Interest Rates

The two-week trend in bond yields shows a significant shift towards lower rate expectations. This major change in the macro landscape hasn't provided the boost to crypto that many would have expected.

Bitcoin Dominance

Bitcoin dominance has seen a slight decrease over two weeks, but the change is minimal. This stability in dominance during a period of price weakness suggests the selling pressure is broad-based across crypto.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Neither Bitcoin nor altcoins are showing particular strength right now. It's like the entire crypto market is holding its breath, waiting to see which way the wind will blow.

Hot Sectors

In this cautious environment, there's a slight preference for more established, larger-cap altcoins over speculative small-caps. Think of it as investors reaching for a life jacket, not a surfboard.

Volume And Activity

Trading volume is below average and decreasing, telling us that conviction is low. It's as if traders are tiptoeing around, not wanting to make any big moves.

Key Shifts

Week Over Week

The most significant change is Bitcoin's failure to maintain support levels despite favorable macro conditions. It's like being offered a helping hand and stumbling anyway.

Two Week Trend

Over two weeks, we've seen a clear shift from cautious optimism to outright concern in the crypto market, even as traditional finance grows more bullish.

Notable Reversals

The relationship between crypto and traditional risk assets seems to be undergoing a reversal. Previously, crypto often led the charge in risk-on environments, but now it's lagging behind.

What This Means For Traders

If Youre Bullish

• Look for oversold bounces on strong support levels, but be prepared for quick reversals
• Wait for a clear break and hold above the $70,000 level before considering longer-term positions
• Use tight stop losses and consider scaling into positions rather than going all-in at once

If Youre Bearish

• Short-term traders might look for continuation of the downtrend, especially if Bitcoin breaks below $65,000
• Watch for failed rallies that don't reclaim key moving averages as potential entry points for shorts
• Be cautious of potential short squeezes if macro conditions continue to improve; keep stops relatively tight

If Youre Uncertain

• Consider reducing position sizes and focusing on shorter timeframes until a clearer trend emerges
• Pay close attention to the $65,000 and $70,000 levels on Bitcoin as key inflection points
• Look for a return of volume and a clear directional move to signal the end of this uncertain phase

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, dips were seen as buying opportunities. Now, rallies are viewed with more suspicion and might be better for taking profits or entering shorts.

From 14d Ago

Two weeks ago, the focus was on catching breakouts to new highs. Today, traders need to be more defensive and prioritize capital preservation.

Current Best Opportunities

The safest approach right now is to focus on range-trading between key support and resistance levels. Look for oversold bounces at support and overbought conditions at resistance for short-term trades.

Approaches To Avoid

Avoid taking large, directional bets or using high leverage in this uncertain environment. The market isn't rewarding aggressive tactics right now.

Timing Considerations

Shorter timeframes (4h and below) are likely to offer cleaner setups than daily or weekly charts in the current choppy conditions.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $65,000 is now critical support. A strong break below could accelerate selling. On the upside, reclaiming $70,000 would be a significant bullish signal.

Recent Breakouts

Bitcoin breaking below its 50-day moving average around $69,500 was a key bearish development in the past week.

Approaching Tests

The 100-day moving average around $63,000 could be tested soon if current weakness persists. This will be a major battleground for bulls and bears.

Final Advice

Main Takeaway

Stay nimble and prioritize capital preservation. This is not the time for heroics or big bets.

Biggest Change

The most significant shift is Bitcoin's weakness in the face of improving traditional market conditions. This divergence demands caution and a reassessment of crypto's near-term prospects.

Risk Reminder

Remember, markets can stay irrational longer than you can stay solvent. In uncertain times like these, it's better to miss out on some gains than to risk large losses.