11/23 - Macro for Humans

Market Overview

Headline

Bitcoin Stumbles as Wall Street Surges: A Tale of Two Markets

Summary

Bitcoin has taken a significant hit, dropping over 21% in two weeks, while the S&P 500 stages a strong recovery. The dollar is strengthening, and Treasury yields are falling, creating a complex landscape for crypto traders.

Mood

It's like we're watching a tug-of-war between traditional and crypto markets, with each pulling in opposite directions. There's a sense of uncertainty in the air, like the calm before a storm.

What Changed Recently

The most striking shift is Bitcoin's sharp decline coupled with the stock market's robust rebound. This divergence is unusual and suggests a potential rotation of capital from crypto to stocks.

Comparative Market Analysis

Vs 7 Days Ago

Stocks

The S&P 500 has reversed course dramatically, moving from oversold conditions to a strong uptrend. This sudden appetite for stocks might be pulling money away from crypto in the short term.

Dollar

The USD has gained strength over the past week, approaching key resistance. A stronger dollar typically puts pressure on Bitcoin prices, which we're seeing play out.

Interest Rates

Treasury yields have dropped significantly, indicating lower interest rate expectations. This should theoretically be positive for risk assets like crypto, making the current Bitcoin weakness even more noteworthy.

Bitcoin Dominance

Bitcoin dominance has slipped slightly, suggesting that even in a down market, some traders are rotating into altcoins rather than exiting crypto entirely.

Vs 14 Days Ago

Stocks

Two weeks ago, stocks were in a slump. Now, we're seeing a sharp recovery. This 180-degree turn in equities sentiment is likely contributing to Bitcoin's struggles as investors chase stock market gains.

Dollar

The dollar has been on a steady climb over the past two weeks. This sustained strength is creating headwinds for Bitcoin and other cryptocurrencies priced in USD.

Interest Rates

Interest rate expectations have cooled considerably in just two weeks. The market is now pricing in a higher chance of rate cuts in 2024, which could eventually support crypto prices once the current volatility settles.

Bitcoin Dominance

Bitcoin's market share has eroded slightly over two weeks, even as prices fell. This resilience in altcoins might indicate that crypto traders are betting on a broader market recovery.

Crypto Specific Trends

Current State

Bitcoin Vs Alts

Despite Bitcoin's price drop, money isn't flooding into Bitcoin as a safe haven. Instead, we're seeing a subtle shift towards altcoins, as if traders are positioning for an eventual market-wide recovery.

Hot Sectors

With overall crypto sentiment bearish, there aren't clear 'hot' sectors. However, the slight increase in altcoin share suggests some speculative interest in smaller cap projects.

Volume And Activity

Trading volume has spiked, particularly for Bitcoin. This high volume during a price drop often indicates capitulation – a possible sign we're approaching a short-term bottom.

Key Shifts

Week Over Week

The most significant change is the acceleration of Bitcoin's price decline coupled with increasing trading volume. This suggests we might be entering the final stages of this correction.

Two Week Trend

Over two weeks, we've seen a clear shift from stability to volatility in crypto, contrasting sharply with the improving stability in traditional markets.

Notable Reversals

The most important reversal is in overall market sentiment. Two weeks ago, crypto was holding steady while stocks stumbled. Now that situation has completely flipped.

What This Means For Traders

If Youre Bullish

• Look for signs of Bitcoin finding support around $82,500 or $80,000 levels
• Wait for a clear reversal pattern, like a double bottom, before entering long positions
• Consider setting tight stop losses, as volatility could continue in the short term

If Youre Bearish

• Short-term shorts might still be profitable, but be cautious of potential snapback rallies
• Watch for any break below $80,000 as confirmation for further downside
• Be prepared to close shorts quickly if stock market strength begins to spill over into crypto

If Youre Uncertain

• Dollar-cost averaging into both Bitcoin and a basket of large-cap altcoins could be a balanced approach
• Keep an eye on the $82,500 and $80,000 levels for Bitcoin – how it reacts here could signal the next major move
• An uptick in Bitcoin dominance would suggest the worst of the selloff might be over

Evolving Trading Guidance

What Changed

From 7d Ago

A week ago, range-bound trading strategies were effective. Now, trend-following approaches (currently bearish) are outperforming.

From 14d Ago

Two weeks ago, crypto looked like a safe haven compared to stocks. That narrative has completely reversed, requiring a major shift in trading strategy.

Current Best Opportunities

Volatility plays, such as straddles or strangles in options markets, could be profitable. For spot traders, waiting for clear reversals before entering new positions is prudent.

Approaches To Avoid

Avoid trying to catch falling knives or using high leverage in either direction. The market is too volatile for aggressive directional bets right now.

Timing Considerations

Short timeframes (4h and below) are seeing the most action. Longer-term positions should be entered cautiously and with proper risk management.

Key Levels To Watch

Critical Thresholds

For Bitcoin, $80,000 is the line in the sand. For the DXY (US Dollar Index), watch the 100.50 resistance level.

Recent Breakouts

Bitcoin breaking below $90,000 was a major bearish signal that's still playing out.

Approaching Tests

The $82,500 support for Bitcoin and 100.50 resistance for DXY are the two most important levels to watch in the coming days.

Final Advice

Main Takeaway

Stay defensive but prepare for opportunities. This volatility will create excellent entry points, but timing is crucial.

Biggest Change

The complete reversal in Bitcoin's perceived safety compared to stocks is the most significant shift from two weeks ago.

Risk Reminder

Volatility cuts both ways. While the downside has been painful, remember that upside moves can be equally dramatic. Position size accordingly.