07/20 - Macro for Humans

Market Overview

Headline

Bitcoin Surges Past $117K as Dollar Shows Signs of Life

Summary

Bitcoin's bullish momentum continues, pushing past $117,000 while altcoins outperform. Meanwhile, the US dollar is hinting at a potential reversal after recent weakness, and Treasury yields are on the rise.

Mood

The market feels like a rollercoaster that's just crested the top of a big hill – exhilarating, but with a touch of nervous anticipation about what comes next.

What Changed Recently

Bitcoin broke through major resistance levels, the dollar formed a potential reversal pattern, and Treasury yields spiked upward.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has continued its upward climb, gaining about 1.25% over the past week. This risk-on sentiment is spilling over into crypto, fueling both Bitcoin and altcoin rallies.

Dollar

The dollar has stabilized and is showing early signs of strength after weeks of decline. This could put some pressure on crypto if the trend continues, but hasn't impacted prices yet.

Interest Rates

Treasury yields have risen notably in the past week, suggesting a shift towards tighter monetary expectations. This could eventually cool risk appetite, but crypto remains unfazed for now.

Bitcoin Dominance

Bitcoin dominance has dropped sharply, falling about 3% in the last week. This indicates a strong appetite for altcoins as traders seek higher-risk, higher-reward opportunities.

Vs 14 Days Ago

Stocks

The S&P 500 is up 2.5% from two weeks ago, maintaining a strong uptrend. This persistent bullish sentiment in traditional markets has provided a supportive backdrop for crypto's impressive rally.

Dollar

The dollar has potentially found a bottom after a prolonged downtrend, forming a double bottom pattern. This marks a significant shift from the clear dollar weakness we saw two weeks ago.

Interest Rates

Treasury yields have broken above key moving averages over the past two weeks, signaling a more substantial shift in interest rate expectations. This is a key change to monitor for potential impacts on crypto.

Bitcoin Dominance

Bitcoin dominance has seen a dramatic decline over the past two weeks, dropping from around 65% to 61.62%. This represents a major rotation into altcoins and a significant increase in risk appetite.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Money is flowing strongly into altcoins right now. It's like Bitcoin opened the door with its rally, and now traders are rushing into riskier assets looking for even bigger gains.

Hot Sectors

DeFi and Layer-2 scaling solutions are seeing major interest as traders bet on the next wave of innovation. NFT-related projects are also heating up again.

Volume And Activity

While overall volume is decreasing, it's still elevated compared to recent months. This suggests strong conviction in the current rally, even as some traders take profits.

Key Shifts

Week Over Week

The most notable change is the acceleration of altcoin performance relative to Bitcoin. A week ago, Bitcoin was leading the charge, but now altcoins are taking center stage.

Two Week Trend

Over the past two weeks, we've seen a clear shift from 'Bitcoin as a safe haven' to 'crypto as a high-growth bet'. This is evident in the declining Bitcoin dominance and surging altcoin prices.

Notable Reversals

The dollar's potential reversal is the most significant change in trend. After weeks of decline that supported crypto prices, we're now seeing early signs of dollar 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 market rally
• Wait for short-term dips in overbought conditions as entry points, rather than chasing parabolic moves
• Consider taking partial profits on big winners and redeploying into lagging sectors that might be next to pop

If Youre Bearish

• Focus on overbought large-caps that might be due for a correction, especially if the dollar continues to strengthen
• Watch for bearish divergences on the 4-hour and daily charts as potential short entry signals
• Keep stops tight and be prepared to close shorts quickly if the overall market momentum remains strong

If Youre Uncertain

• Stick to major assets with high liquidity to allow for quick entries and exits as the situation develops
• Pay close attention to the $120,000 level on Bitcoin as a key psychological barrier
• Watch for a potential bounce in Bitcoin dominance from oversold levels, which could signal a short-term rotation back to BTC

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, focusing on Bitcoin and large-cap altcoins was the safer play. Now, the real opportunities are in discovering undervalued mid-cap alts before they surge.

From 14d Ago

Two weeks ago, we were looking at Bitcoin as a potential safe haven. Now, it's all about embracing risk and finding the next big altcoin narrative.

Current Best Opportunities

Look for altcoins with strong fundamentals that haven't yet seen parabolic moves. DeFi protocols with growing TVL and Layer-2 solutions gaining adoption are particularly promising.

Approaches To Avoid

Avoid trying to short the overall market trend or betting on a major correction. The momentum is too strong right now for contrarian plays.

Timing Considerations

This is a time for active trading rather than passive holding. Be prepared to take profits and rotate into new opportunities as sectors heat up and cool off rapidly.

Key Levels To Watch

Critical Thresholds

Bitcoin at $120,000 and Ethereum at $7,500 are the big psychological levels to watch. Breaking these could trigger another wave of FOMO buying.

Recent Breakouts

Bitcoin convincingly broke through $110,000 and $115,000 in the past week, turning these previous resistances into new support levels.

Approaching Tests

Watch for a test of the 70 RSI level on the Bitcoin daily chart. A break above could signal continued euphoria, while a rejection might hint at an upcoming cooldown.

Final Advice

Main Takeaway

Embrace the altcoin season, but stay nimble and take profits regularly. This rally could have more legs, but the risks are also rising.

Biggest Change

The potential dollar reversal is the most significant shift from two weeks ago. If it gains steam, it could be the factor that eventually cools off this crypto rally.

Risk Reminder

The market feels unstoppable right now, but that's precisely when you need to be most careful. Don't let FOMO push you into overleveraged or outsized positions.