05/09 - Macro for Humans
Market Overview
Headline
Bitcoin Flexes as Dollar Weakens: A Shifting Landscape for Crypto Traders
Summary
Bitcoin's dominance is near multi-month highs as the US dollar shows weakness. Stock markets are recovering, while bond yields signal expectations of higher interest rates. This creates a complex but potentially rewarding environment for crypto traders.
Mood
The market feels like a seesaw, with Bitcoin on one end and altcoins on the other. Right now, Bitcoin's side is firmly planted on the ground, but there's a sense that a shift could be coming.
What Changed Recently
The most notable shift is Bitcoin's continued strength relative to altcoins, even as the broader crypto market benefits from dollar weakness. The stock market's recovery is also providing a more risk-on backdrop.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has turned bullish in the short-term, moving above its 20-day EMA. This improved risk sentiment is providing a more supportive environment for crypto overall, potentially setting the stage for altcoin recovery.
Dollar
The DXY (US Dollar Index) has weakened further, falling below all major EMAs. This is typically bullish for crypto as it makes Bitcoin and other digital assets more attractive to global investors.
Interest Rates
The 10-year Treasury yield has become more volatile, spiking up before pulling back. This uncertainty around interest rates is keeping some investors cautious, but the overall trend still supports risk assets like crypto.
Bitcoin Dominance
Bitcoin dominance has continued to climb, reaching multi-month highs. This suggests that while the overall crypto market is benefiting from dollar weakness, investors are still favoring Bitcoin over altcoins for now.
Vs 14 Days Ago
Stocks
Two weeks ago, stocks were struggling. The recent recovery above the 20-day EMA represents a significant shift in sentiment that could start pulling more cautious money into crypto.
Dollar
The dollar's weakness has become more pronounced over the past two weeks. This longer-term trend is creating a more favorable macro backdrop for crypto, especially for traders in emerging markets.
Interest Rates
Interest rate expectations have become more hawkish over the past two weeks, as reflected in bond yields. While this could eventually pressure crypto, for now, the market seems more focused on dollar weakness.
Bitcoin Dominance
Bitcoin's dominance has been on a steady climb over the past two weeks. This extended trend suggests a deeper shift in market psychology, with investors seeking the relative safety of Bitcoin within the crypto space.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Money is clearly flowing into Bitcoin over altcoins right now. It's like everyone's running to the biggest, strongest-looking shelter in an uncertain storm.
Hot Sectors
Given Bitcoin's dominance, Bitcoin-adjacent sectors like mining and Bitcoin ETFs are seeing the most interest. Layer-2 solutions for Bitcoin are also gaining attention.
Volume And Activity
Trading volume for Bitcoin is strong, while altcoin volume is decreasing. This tells us there's strong conviction in Bitcoin's rise, but the altcoin market might be due for a shakeup.
Key Shifts
Week Over Week
The most significant change is the acceleration of Bitcoin's dominance alongside improving stock market conditions. A week ago, it wasn't clear if Bitcoin's rise was purely a flight to safety.
Two Week Trend
Over two weeks, we've seen a clear trend of money rotating out of altcoins and into Bitcoin, even as overall crypto market conditions improved due to dollar weakness.
Notable Reversals
The stock market's shift from bearish to bullish is the most notable reversal. This could eventually lead to improved risk appetite for altcoins, but it hasn't happened yet.
What This Means For Traders
If Youre Bullish
- Look for setups that capitalize on Bitcoin's strength, such as breakouts above the $104,000 resistance
- Wait for a daily close above $104,000 before entering new long positions
- Consider scaling into positions rather than going all-in, as the RSI is approaching overbought levels
If Youre Bearish
- Focus on altcoins that are underperforming relative to Bitcoin for potential short setups
- Wait for signs of Bitcoin dominance peaking before taking on significant short exposure
- Use tight stop losses, as the overall market conditions are becoming more favorable for crypto
If Youre Uncertain
- Consider a barbell strategy: maintain core Bitcoin exposure while keeping dry powder for altcoin opportunities
- Watch the $100,000 level in Bitcoin as a key psychological support
- Look for a potential divergence between Bitcoin dominance and overall crypto market cap as a sign of changing trends
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, caution was warranted due to uncertain stock market conditions. Now, there's more room for optimism, especially in Bitcoin-related trades.
From 14d Ago
Two weeks ago, the altcoin market still had some life. The shift towards Bitcoin dominance means altcoin traders need to be much more selective now.
Current Best Opportunities
The most favorable approach today is to focus on Bitcoin and closely related assets while remaining ready for a potential altcoin rotation.
Approaches To Avoid
Avoid assuming altcoins will immediately follow Bitcoin's rise. The current market is showing a clear preference for Bitcoin over altcoins.
Timing Considerations
This is a market that favors swing trading over day trading. Look for multi-day setups rather than trying to catch every intraday move.
Key Levels To Watch
Critical Thresholds
Bitcoin's $104,000 resistance and $100,000 support are the two most critical levels to watch across the crypto market
Recent Breakouts
Bitcoin breaking above $103,000 and the S&P 500 moving above its 20-day EMA are the most significant recent breakouts
Approaching Tests
Watch for a test of the 70 RSI level on the Bitcoin dominance chart, which could signal a short-term peak in Bitcoin's relative strength
Final Advice
Main Takeaway
Stay focused on Bitcoin for now, but be ready for a potential shift in momentum towards altcoins if broader risk appetite continues to improve.
Biggest Change
The most significant change from 7-14 days ago is the alignment of Bitcoin strength with improving stock market conditions, creating a more nuanced bullish scenario.
Risk Reminder
Remember, Bitcoin's RSI is approaching overbought levels. Don't let FOMO drive you to overexpose yourself at potential local tops.