07/11 - Macro for Humans

Market Overview

Headline

Bitcoin Surges Past $116K as Dollar Weakens: A Perfect Storm for Crypto Bulls?

Summary

Bitcoin is riding high above $116,000 as the US dollar weakens and stocks continue their upward march. This combination is creating a potent environment for crypto gains, but some caution flags are starting to appear.

Mood

The market feels like a party that's in full swing, but some guests are starting to glance at their watches. There's still plenty of optimism, but a sense that we might be nearing 'last call' for easy gains.

What Changed Recently

Bitcoin broke through major resistance levels, gaining over 11% in two weeks. Meanwhile, the US dollar has continued to weaken, providing a tailwind for crypto and other risk assets.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

Stocks have continued their upward climb, now trading well above all major moving averages. This risk-on sentiment is spilling over into crypto, fueling Bitcoin's recent gains.

Dollar

The US dollar has weakened further, dropping below all major moving averages. This is creating a favorable environment for Bitcoin as it often moves inversely to the dollar.

Interest Rates

Bond yields have remained relatively stable, suggesting that rate expectations haven't shifted dramatically. This stability is allowing the crypto rally to continue without interest rate headwinds.

Bitcoin Dominance

Bitcoin dominance has increased slightly, approaching the 65% level. This suggests that while the overall crypto market is rising, Bitcoin is capturing a larger share of the gains compared to altcoins.

Vs 14 Days Ago

Stocks

The S&P 500 has gained significant ground, now trading above 6,280. This sustained rally in stocks has created a strong risk-on environment that's benefiting crypto.

Dollar

The dollar's decline has accelerated over the past two weeks, dropping from around 100 on the DXY to 97.11. This weaker dollar has been a major catalyst for Bitcoin's impressive 11% gain.

Interest Rates

Interest rates have remained range-bound between 4.10% and 4.55%, providing a stable backdrop for risk assets. This lack of volatility in rates has allowed traders to focus on other market dynamics.

Bitcoin Dominance

Bitcoin dominance has trended upwards over the past two weeks, forming a double top pattern near 65%. This suggests that while the entire crypto market is rising, Bitcoin has been outperforming most altcoins.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, money is flowing more strongly into Bitcoin than altcoins. This is typical during the early stages of a strong crypto bull run, as Bitcoin often leads the way before altcoins catch up.

Hot Sectors

Large-cap cryptocurrencies and DeFi tokens linked to Bitcoin's ecosystem are seeing the most interest today, riding on Bitcoin's coattails.

Volume And Activity

Trading volume for Bitcoin is decreasing despite the price increases. This divergence suggests that while the trend is still up, conviction might be waning, and we could be due for a pullback or consolidation.

Key Shifts

Week Over Week

The most significant change is the acceleration of Bitcoin's uptrend, breaking through key resistance levels that had held for months.

Two Week Trend

Over the past 14 days, we've seen a clear shift from a ranging market to a strong uptrend, coinciding with the dollar's continued weakness.

Notable Reversals

The most important reversal has been in market sentiment. Two weeks ago, there was still significant caution. Now, FOMO (fear of missing out) is becoming a driving force.

What This Means For Traders

If Youre Bullish

• Look for pullbacks to support levels as potential entry points. The 20-day EMA, currently around $108,000, could provide a good opportunity if we see a dip.
• Wait for consolidations after strong moves up. When Bitcoin pauses and holds a level for 12-24 hours, it often signals another leg up is coming.
• Use trailing stops to protect your gains. In this strong uptrend, you want to let your winners run while having a safety net.

If Youre Bearish

• Focus on overbought conditions on shorter timeframes (1-hour, 4-hour charts) for potential short entries.
• Wait for a clear break of the uptrend line or a daily close below the 20-day EMA before taking significant short positions.
• Be prepared to close shorts quickly if the uptrend resumes. Use tight stop losses and consider using options for defined risk.

If Youre Uncertain

• Consider using a barbell strategy: Hold some long-term spot positions while trading a smaller portion of your portfolio to capture short-term moves.
• Watch the $120,000 level closely. A strong break above could signal another leg up, while rejection could mean a deeper pullback.
• Keep an eye on the DXY (US Dollar Index). If it starts to strengthen, it could be an early warning sign for crypto.

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, we were looking for a breakout. Now, we're in a clear uptrend, so the focus has shifted to finding good entry points on pullbacks rather than breakout trades.

From 14d Ago

Two weeks ago, range-trading strategies were optimal. Now, trend-following approaches are working best as Bitcoin has established a clear direction.

Current Best Opportunities

Look for high-probability entries on shorter timeframes within the larger uptrend. Use the 1-hour and 4-hour charts to spot pullbacks to moving averages or support levels.

Approaches To Avoid

Avoid trying to pick a top or fighting the trend with large short positions. Counter-trend trades are extremely risky in this environment.

Timing Considerations

The best trades are often found in the Asian or European sessions when volatility is lower. Use the higher-volume US session to exit trades or manage positions.

Key Levels To Watch

Critical Thresholds

The $120,000 level for Bitcoin and 65% for Bitcoin dominance are the two most important levels to watch. Breaking above or below these could signal the next major move.

Recent Breakouts

Bitcoin recently broke through the $110,000 resistance, which is now acting as support. The S&P 500 also broke above 6,200, confirming the risk-on environment.

Approaching Tests

We're approaching a test of the psychologically important $120,000 level for Bitcoin. For the DXY, watch the 96.00 support level, which if broken, could fuel further crypto gains.

Final Advice

Main Takeaway

Ride the uptrend in Bitcoin, but keep your guard up. Use trailing stops and don't be afraid to take some profits as we approach major resistance levels.

Biggest Change

The shift from a cautious, range-bound market to a full-blown uptrend is the most significant change from two weeks ago. This has completely altered optimal trading strategies.

Risk Reminder

Remember, the faster we climb, the more likely a sharp pullback becomes. Don't let FOMO push you into overleveraged positions. Always size your trades so you can survive a 30-40% drawdown in crypto.