07/03 - Macro for Humans

Market Overview

Headline

Bitcoin Flexes as Dollar Weakens: A Perfect Storm for Crypto Bulls?

Summary

Global markets are showing a risk-on appetite, with stocks climbing and the dollar retreating. Bitcoin is surging towards $110k as loose liquidity conditions favor crypto assets.

Mood

The market feels like a party that's just getting started. There's excitement in the air, but also a hint of caution as we approach key psychological levels.

What Changed Recently

The most significant shift is the weakening dollar, which has accelerated crypto's upward momentum. We're also seeing increased interest in altcoins as Bitcoin dominance stabilizes.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its bullish trend, now trading comfortably above all major EMAs. This risk-on sentiment is providing a supportive backdrop for crypto, encouraging more mainstream investors to consider digital assets.

Dollar

The USD has weakened considerably over the past week, dropping below all major EMAs. This is creating a tailwind for crypto as Bitcoin often moves inversely to the dollar.

Interest Rates

Bond yields have declined, suggesting expectations of looser monetary policy. This is typically bullish for crypto as it increases liquidity and risk appetite.

Bitcoin Dominance

Bitcoin dominance has stabilized around 65%, indicating a balanced flow of capital between Bitcoin and altcoins. This is a shift from the Bitcoin-centric rally we saw a week ago.

Vs 14 Days Ago

Stocks

The stock market's bullish trend has accelerated, with a clear EMA20/50 crossover that wasn't present two weeks ago. This sustained risk-on environment is providing even stronger support for crypto markets.

Dollar

The dollar's decline has become more pronounced over the past two weeks, moving from a neutral trend to a clearly bearish one. This longer-term shift is creating a more favorable macro environment for crypto.

Interest Rates

The downward trend in bond yields has become more established, forming a descending triangle pattern. This suggests a more persistent shift towards looser financial conditions, which is typically very supportive of crypto valuations.

Bitcoin Dominance

Bitcoin dominance has increased slightly over the past two weeks, but the rate of increase has slowed. This suggests we may be entering a more balanced phase where both Bitcoin and altcoins can perform well.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Money is flowing into both Bitcoin and altcoins, but Bitcoin is still leading the charge. It's like Bitcoin is the locomotive pulling the entire crypto train forward.

Hot Sectors

DeFi and Layer 2 scaling solutions are seeing renewed interest as the market expansion brings attention to Ethereum's scaling challenges.

Volume And Activity

Trading volume is decreasing but remains healthy, suggesting steady accumulation rather than FOMO-driven buying. It's like a slow, steady inhale rather than a gasping breath.

Key Shifts

Week Over Week

The most notable change is the increased interest in altcoins, particularly in DeFi. A week ago, Bitcoin was hogging the spotlight, but now the wealth is spreading.

Two Week Trend

Over the past two weeks, we've seen a clear shift from uncertainty to bullish conviction. The market has moved from asking 'Is this rally real?' to 'How high can we go?'

Notable Reversals

The dollar's bearish reversal is the most significant change. Two weeks ago, it was holding steady; now it's in a clear downtrend, which is rocket fuel for crypto.

What This Means For Traders

If Youre Bullish

• Look for high-volume breakouts above the $110,000 level for Bitcoin as a sign of continued strength
• Wait for pullbacks to the EMA20 on lower timeframes as potential entry points
• Consider scaling into altcoin positions as money begins to flow more freely into the broader market

If Youre Bearish

• Focus on counter-trend trades at major psychological resistance levels like $110,000 and $112,000
• Watch for divergences between price and RSI as potential reversal signals
• Be prepared to close shorts quickly if the uptrend accelerates; this is a strong bull market

If Youre Uncertain

• Use options strategies like collars to maintain upside exposure while protecting against downside
• Watch the $108,000 level for Bitcoin; a strong bounce here confirms bullish sentiment
• Monitor the DXY closely; further dollar weakness would likely drive crypto higher

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, the focus was primarily on Bitcoin. Now, there are more opportunities in select altcoins as the rally broadens.

From 14d Ago

Two weeks ago, caution was warranted due to uncertain macro conditions. Now, the environment is much more favorable for aggressive long positions.

Current Best Opportunities

Look for high-quality altcoins that have lagged behind Bitcoin's recent move. They may be primed for catch-up rallies. Also, consider momentum trades on Bitcoin as it approaches the key $110,000 level.

Approaches To Avoid

Avoid trying to pick tops or fight the trend. This is not the environment for contrarian bearish bets unless you have a very compelling reason and strict risk management.

Timing Considerations

Intraday trading may be challenging due to decreasing volume. Consider swing trades with a 3-7 day horizon to capture larger moves.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $110,000 is the big psychological level to watch. For the DXY, a break below 96 could accelerate dollar weakness and boost crypto further.

Recent Breakouts

Bitcoin's move above $108,000 and the S&P 500's push past $6,100 are significant bullish signals from the past week.

Approaching Tests

Watch for Bitcoin to test $112,000 and for the S&P 500 to challenge $6,200 in the coming days. These round numbers often act as short-term resistance.

Final Advice

Main Takeaway

The macro environment is aligning in crypto's favor. Stay bullish, but remain vigilant as we approach major resistance levels.

Biggest Change

The dollar's shift from stability to weakness is the most significant change, creating a much more favorable environment for crypto compared to two weeks ago.

Risk Reminder

While conditions are bullish, remember that crypto can turn on a dime. Always use stop losses and never risk more than you can afford to lose, especially as we approach uncharted price territory for Bitcoin.