07/18 - Macro for Humans
Market Overview
Headline
Bitcoin Surges Past $119K as Dollar Shows Signs of Life
Summary
Bitcoin's bullish momentum continues while the US dollar hints at a potential reversal. Altcoins are outperforming as risk appetite remains high, but rising Treasury yields suggest caution may be warranted.
Mood
The market feels like a party that's in full swing, but some guests are starting to check their watches.
What Changed Recently
Bitcoin broke above $119,000, the US dollar formed a potential double bottom, and Treasury yields spiked significantly.
Comparative Market Analysis
Vs 7 Days Ago
Stocks
The S&P 500 has continued its upward march, boosting overall risk appetite and supporting crypto prices. This bullish stock sentiment is providing a tailwind for crypto, especially altcoins.
Dollar
The dollar has shown signs of bottoming out after a prolonged downtrend. This potential reversal could put pressure on crypto prices if it gains momentum.
Interest Rates
Treasury yields have risen sharply, indicating expectations of higher interest rates. This could eventually cool risk appetite, but for now, the crypto market is shrugging it off.
Bitcoin Dominance
Bitcoin dominance has declined significantly, suggesting traders are rotating into altcoins as risk appetite remains high.
Vs 14 Days Ago
Stocks
The stock market's bullish trend has accelerated, pushing the S&P 500 to new highs. This sustained rally has created a very risk-on environment, benefiting crypto across the board.
Dollar
The dollar's downtrend has potentially bottomed out, marking a significant shift from two weeks ago. This change could impact crypto if it develops into a stronger uptrend.
Interest Rates
Bond yields have surged, reflecting a major shift in interest rate expectations. While this hasn't dampened crypto enthusiasm yet, it's a growing risk factor to monitor.
Bitcoin Dominance
Bitcoin dominance has been in a steady decline, indicating a strong altcoin season is underway as traders embrace higher-risk crypto assets.
Crypto Specific Trends
Current State
Bitcoin Vs Alts
Money is flowing heavily into altcoins right now. Bitcoin is still rising, but altcoins are outpacing it as traders chase higher returns in a risk-on environment.
Hot Sectors
DeFi and AI-related crypto projects are seeing the most interest today, likely driven by the broader tech rally and speculative fervor.
Volume And Activity
Trading volume for Bitcoin is actually decreasing despite the price rise, suggesting this rally might be running out of steam. Altcoin volumes are surging, indicating strong speculative interest.
Key Shifts
Week Over Week
The most notable change is the sharp decline in Bitcoin dominance, signaling a rotation into altcoins that wasn't as pronounced a week ago.
Two Week Trend
Over the past two weeks, we've seen a clear acceleration in risk appetite, with altcoins and high-beta assets significantly outperforming Bitcoin and traditional markets.
Notable Reversals
The potential bottoming of the US dollar is the most significant reversal signal, as it could eventually put pressure on the entire crypto market if it gains strength.
What This Means For Traders
If Youre Bullish
- Look for breakouts in mid-cap altcoins that are just starting to catch up to the broader rally
- Wait for pullbacks to major moving averages before entering new long positions, as many assets are overbought
- Consider trailing stops to protect profits, as the rally is showing some signs of exhaustion in Bitcoin
If Youre Bearish
- Focus on overbought conditions in Bitcoin as potential short opportunities if key levels fail to hold
- Watch for divergences between price and volume/momentum indicators as signs of potential reversals
- Be prepared to quickly exit short positions if the dollar's potential reversal fails to materialize
If Youre Uncertain
- Consider balanced positions across both Bitcoin and top altcoins to capture upside while managing risk
- Watch the $120,000 level in Bitcoin as a key psychological barrier that could provide clarity on direction
- Monitor the relationship between crypto prices and Treasury yields for signs of changing risk sentiment
Evolving Trading Guidance
What Changed
From 7d Ago
A week ago, focusing on Bitcoin was the safer play. Now, calculated risks on select altcoins offer better potential returns in this risk-on environment.
From 14d Ago
Two weeks ago, the market was much more cautious. Now, aggressive bullish strategies are working well, but the risks of a pullback are also higher.
Current Best Opportunities
Look for altcoins with strong fundamentals that haven't yet seen parabolic moves. DeFi and AI-related projects seem particularly promising in the current environment.
Approaches To Avoid
Avoid trying to call the top in Bitcoin or shorting strong uptrends without clear reversal signals. Also, be cautious about chasing altcoins that have already seen massive pumps.
Timing Considerations
Shorter timeframes (4h and below) are favorable for active trading in this volatile environment. Consider being more active during US market hours when volume is highest.
Key Levels To Watch
Critical Thresholds
The $120,000 level for Bitcoin and 99.00 for the US Dollar Index are the two most important levels to watch across all markets.
Recent Breakouts
Bitcoin breaking above $115,000 and Treasury yields surpassing 4.4% are the most significant recent breakouts.
Approaching Tests
Watch for Bitcoin to test $120,000 and the S&P 500 to approach 6300 in the coming days based on current momentum.
Final Advice
Main Takeaway
Ride the altcoin wave but keep a close eye on Bitcoin and the dollar for early signs of a sentiment shift.
Biggest Change
The most significant change is the sharp rise in Treasury yields, which could eventually cool risk appetite across all markets.
Risk Reminder
Remember, when everyone is feeling euphoric is often when markets are most vulnerable. Don't let FOMO cloud your judgment – stick to your risk management rules.