11/22 - Macro for Humans

Market Overview

Headline

Crypto Stumbles as Dollar Surges: Navigating the New Reality

Summary

Bitcoin has taken a significant hit, dropping 37% in two weeks as the US dollar strengthens. Meanwhile, the stock market is showing surprising resilience, creating a complex trading environment.

Mood

The crypto market feels like a roller coaster that just hit a steep drop. There's fear in the air, but also a sense that we might be nearing the bottom of this particular plunge.

What Changed Recently

The most dramatic shift is Bitcoin's sharp decline, breaking through multiple support levels. This has coincided with a surge in the US dollar, creating headwinds for crypto and other risk assets.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

Stocks have shown surprising strength over the past week, diverging from crypto's downward trend. This unusual decoupling suggests that traditional investors aren't as spooked by macro conditions as crypto traders.

Dollar

The dollar has continued its upward march, gaining about 0.7% in the past week. This ongoing strength is making life difficult for Bitcoin and other cryptocurrencies, as a strong dollar typically puts pressure on risk assets.

Interest Rates

Bond yields have dipped slightly in the past week, hinting at changing expectations for future interest rates. This could provide some relief for risk assets if the trend continues, potentially easing some pressure on crypto.

Bitcoin Dominance

Bitcoin dominance has remained relatively stable over the past week, hovering around 59%. This suggests that despite the overall market decline, there hasn't been a significant flight to Bitcoin's relative safety from altcoins.

Vs 14 Days Ago

Stocks

The contrast with two weeks ago is stark. While crypto has plummeted, stocks have actually gained ground. This divergence highlights the current uncertainty in the broader financial landscape.

Dollar

The dollar's strength has been a defining story of the past two weeks, with the DXY up 1.37%. This surge has been a major headwind for crypto, contributing to Bitcoin's dramatic fall.

Interest Rates

Interest rate expectations have shifted notably in the past two weeks. The decline in the 10-year yield from two weeks ago suggests markets are pricing in a more dovish Fed outlook, which could eventually support a crypto recovery.

Bitcoin Dominance

Bitcoin dominance has actually decreased slightly over the past two weeks, despite the market downturn. This unusual pattern suggests that the sell-off has been broad-based, rather than a typical flight to Bitcoin's relative safety.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Right now, it's less about Bitcoin vs. alts and more about the entire crypto market facing pressure. Neither Bitcoin nor alts are showing clear leadership, with the entire space struggling against macro headwinds.

Hot Sectors

In this risk-off environment, there aren't really any 'hot' sectors. Defensive plays like stablecoins are seeing increased interest as traders look to preserve capital.

Volume And Activity

Trading volume has spiked, particularly during the sharp drop on November 9th. This high volume suggests strong conviction in the current downtrend, but could also indicate we're approaching a climax sell-off.

Key Shifts

Week Over Week

The most significant change is the acceleration of Bitcoin's decline. What started as a gradual pullback has turned into a steep drop, breaking through key support levels.

Two Week Trend

Over the past two weeks, we've seen a complete shift in market sentiment. The optimism of early November has been replaced by fear and uncertainty, with many traders now in 'capital preservation' mode.

Notable Reversals

The most notable reversal is in the relationship between crypto and traditional markets. Two weeks ago, they were moving in tandem. Now, we're seeing a significant divergence, with stocks holding up while crypto tumbles.

What This Means For Traders

If Youre Bullish

• Look for signs of capitulation, such as a volume climax or a 'wick' on the daily chart, which could signal a potential bottom
• Wait for a clear break and hold above the 20-day EMA before considering long positions
• Consider scaling into positions slowly rather than going all-in, as we could see further downside before a reversal

If Youre Bearish

• The trend is your friend right now, but be cautious of oversold conditions that could lead to sharp bounces
• Watch for any divergence between price and RSI, which could signal weakening downward momentum
• Consider taking partial profits on shorts, as the market could be nearing levels where bargain hunters step in

If Youre Uncertain

• Cash is a position too. There's no shame in sitting on the sidelines until the picture becomes clearer
• Watch the $30,000 level on Bitcoin closely. A break below could trigger another leg down, while holding above might signal a potential bottom
• Keep an eye on the DXY. Any signs of dollar weakness could be a precursor to a crypto recovery

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, we were looking at a gradual decline. Now, we're in full-on bearish territory. Strategies that worked for a slow bleed may not be suitable for this sharper drop.

From 14d Ago

Two weeks ago, many were still looking for upside breakouts. That's completely off the table now. We've shifted from 'buy the dip' to 'don't catch a falling knife' territory.

Current Best Opportunities

For aggressive traders, short-term bounces from oversold conditions could provide quick profits. For more conservative traders, building a watchlist of quality projects at discount prices for potential long-term entries is a smart move.

Approaches To Avoid

Avoid trying to pick the exact bottom or using high leverage in either direction. The market is too volatile for such precise timing or amplified risk.

Timing Considerations

Short timeframes (1-4 hours) might offer the best opportunities for now, as long-term trends are unclear. Be prepared for increased volatility around US market opens and closes.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $30,000 is the line in the sand. For the DXY, watch 100.50 – a break above could spell more trouble for crypto.

Recent Breakouts

Bitcoin has broken below the critical $40,000 and $35,000 levels in the past week, turning former support into resistance.

Approaching Tests

The 200-week moving average, currently around $29,000 for Bitcoin, could be tested soon. This has historically been a strong support level.

Final Advice

Main Takeaway

Respect the downtrend, but be prepared for a potential sharp reversal. Capital preservation should be the priority until we see clear signs of stabilization.

Biggest Change

The complete shift in market dynamics from two weeks ago, with crypto and traditional markets now moving in opposite directions.

Risk Reminder

In highly volatile conditions like these, position sizing is crucial. Don't risk more than you can afford to lose, and consider reducing your usual position sizes until the market shows clearer direction.