05/25 - Macro for Humans

Market Overview

Headline

Bitcoin Breaks $100K as Dollar Weakens: A New Era for Crypto?

Summary

Bitcoin has surged past $107,000 amid a weakening US dollar and rising Treasury yields. The stock market remains bullish, creating a risk-on environment that's fueling crypto enthusiasm.

Mood

The market feels like a party that's just getting started. There's excitement in the air, but also a hint of nervousness as traders wonder how long the good times can last.

What Changed Recently

Bitcoin smashed through the psychological $100,000 barrier, a milestone that's drawing significant attention. Meanwhile, the US dollar's continued decline is providing a tailwind for crypto assets.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has maintained its bullish trend over the past week, creating a supportive environment for risk assets like crypto. This positive sentiment is spilling over, encouraging more aggressive positioning in Bitcoin and altcoins.

Dollar

The US dollar has weakened further in the past 7 days, making Bitcoin more attractive as a potential store of value. This dollar weakness is also boosting other major currencies, which could increase global crypto demand.

Interest Rates

The 10-year Treasury yield has continued its upward march, suggesting markets are pricing in higher interest rates. While this could eventually pressure crypto, for now it's being interpreted as a sign of economic strength, supporting the overall bull market.

Bitcoin Dominance

Bitcoin dominance has remained steady over the past week, indicating that the current rally is lifting both Bitcoin and altcoins relatively evenly. This suggests a broad-based crypto bull market rather than just a Bitcoin-specific surge.

Vs 14 Days Ago

Stocks

The S&P 500 is up 5.51% over the past two weeks, reflecting a significant risk-on shift. This has created a much more favorable environment for crypto compared to mid-May, with increased appetite for high-growth, high-risk assets.

Dollar

The dollar's bearish trend has accelerated over the past 14 days, providing an even stronger tailwind for Bitcoin. This extended dollar weakness is making crypto increasingly attractive to international investors seeking dollar alternatives.

Interest Rates

The 14-day trend in bond yields shows a strong upward movement, marking a significant shift in interest rate expectations. While this hasn't dampened crypto enthusiasm yet, it's a trend that could eventually challenge the current bull market if it continues.

Bitcoin Dominance

Bitcoin dominance is up slightly (0.57%) from two weeks ago, suggesting that while Bitcoin is leading the charge, it's not dramatically outpacing altcoins. This indicates a healthy overall crypto market with broad participation.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, money is flowing into both Bitcoin and altcoins, but Bitcoin has a slight edge. It's like a rising tide lifting all boats, with the biggest boat (Bitcoin) getting a bit more lift.

Hot Sectors

Layer-1 alternatives to Ethereum and AI-related crypto projects are seeing increased interest as Bitcoin's rally sparks curiosity in the broader crypto ecosystem.

Volume And Activity

Trading volume for Bitcoin is actually decreasing despite the price rise, which suggests this rally might be running out of steam. It's like a party where the music's still playing, but fewer people are dancing.

Key Shifts

Week Over Week

The most significant change is the decisive break above $100,000 for Bitcoin, which has shifted market psychology from 'if' to 'when' regarding further price increases.

Two Week Trend

Over the past 14 days, we've seen a clear acceleration in Bitcoin's upward momentum, coinciding with the dollar's weakness. This has created a powerful narrative around Bitcoin as a dollar hedge.

Notable Reversals

The US dollar has seen a notable bearish reversal over the past two weeks, shifting from a consolidation pattern to a clear downtrend. This has been a key driver of crypto strength.

What This Means For Traders

If Youre Bullish

• Look for high-volume breakouts in major altcoins as they often follow Bitcoin's lead
• Wait for pullbacks to key moving averages (like the 20 EMA) as potential entry points
• Consider scaling into positions rather than going all-in, as the decreasing volume suggests caution

If Youre Bearish

• Focus on overbought conditions in individual altcoins rather than shorting Bitcoin directly
• Watch for divergences between price and RSI as potential short entry signals
• Keep stops tight and be prepared to close shorts quickly if Bitcoin shows signs of continued strength

If Youre Uncertain

• Consider dollar-cost averaging into both Bitcoin and a basket of large-cap altcoins to balance risk
• Watch the $100,000 level in Bitcoin – a strong bounce from this area could confirm bullish sentiment
• Pay attention to the US Dollar Index (DXY) – further weakness could signal continued crypto strength

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, breaking $100,000 was the focus. Now, traders need to be thinking about managing positions in an extended rally and watching for signs of exhaustion.

From 14d Ago

Two weeks ago, the crypto market was more cautious. Now, it's shifted to a clearly bullish bias, requiring a mental adjustment to look for buying opportunities rather than potential reversals.

Current Best Opportunities

Look for high-quality altcoins that haven't yet followed Bitcoin's massive move. These 'laggards' often play catch-up and can offer better risk/reward at this stage of the rally.

Approaches To Avoid

Avoid chasing parabolic moves in small-cap altcoins. The fear of missing out (FOMO) can be strong, but these are often the first to crash when sentiment shifts.

Timing Considerations

Consider shorter timeframes for trades as volatility increases. What might have been a good swing trade last week could be better as a day trade in the current environment.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $110,000 is the next major psychological level. For the DXY, watch 98.50 as a potential support level that could signal a bounce in the dollar (and potential pressure on crypto).

Recent Breakouts

Bitcoin convincingly broke above $100,000, while the S&P 500 has pushed above 5,800.

Approaching Tests

The 10-year Treasury yield is approaching 4%, a level that could spark volatility across all markets if breached.

Final Advice

Main Takeaway

Stay nimble and don't let FOMO cloud your judgment. This rally is strong, but the decreasing volume suggests caution is warranted.

Biggest Change

The psychological impact of Bitcoin surpassing $100,000 cannot be overstated. It's shifted the narrative and could draw in a new wave of investors.

Risk Reminder

Remember, markets that rise this quickly can fall just as fast. Always use stop losses and never risk more than you can afford to lose, especially in such a volatile environment.