Thinking Through Next Moves
Yesterday's crypto selloff was an opportunity if you've been waiting for a meaningful pullback. Are we going to get any additional pain or is it time to put more tokens in the machine?
As you guys probably know, I’ve been waiting for a pullback in the crypto market for a few weeks. We got more of a falling knife than a dip yesterday. Bloody hands? Not so much. That 14% intraday meltdown from an all time high yesterday was bought. We find ourselves closer to the ATH than yesterday’s low. I still think we should probably see more of the dreaded red candles. But I’m willing to admit I want a lower price to buy and I may not get it. Because, of course, there’s an argument against lower prices as well.
Here are three charts that I think tell a very interesting story when taken together. First up, Oil:
Again we find black gold above $80 per barrel and holding support above all three major daily MAs (50, 100, 200) - while those MAs are converging with the lower timescale band moving up. This is a bullish chart, in my opinion.
Next, the dollar index:
Here we’re probably looking at the opposite. Failure to break out over 105 and now knifing through those same MAs but to the downside. This does not look very good. And here’s the third chart:
This is the 30 day correlation for Bitcoin with the S&P 500 SPY 0.00%↑ , the Nasdaq QQQ 0.00%↑ and Gold GLD 0.00%↑.
BTC and S&P 500 Correlation: 88%
BTC and Nasdaq Correlation: 81%
BTC and Gold Correlation: 54%
These correlations are all coming together. Bitcoin’s mirroring of tech stonks has been strong in recent weeks. But now even the coin’s correlation with Gold is ripping higher. Consider that BTC just made a new all time high in dollars yesterday and Gold is currently making a new all time high in dollars as I type this. This is not how the previous Bitcoin halving cycle played out. We didn’t have both Gold and Bitcoin making new all time highs within 24 hours of each other. We didn’t have the new high in BTC come before the halving either. It has always been after. Why? Occam’s Razor? It’ ain’t pretty…
The scary thing is we may actually be witnessing the acceleration of the de-dollarization trade. I know, I get it. I’m sure many are tired of hearing the dollar could collapse or hyperinflate. It’s not something most people can really wrap their minds around but it’s certainly not a 0% outcome.
My Current Approach
The dollar sucks. Long live the dollar. I actually still have the “t-bill and chill” trade on to a fairly significant degree.
3 month T-bills are still paying over 5 and a quarter. Longer term rates are still holding above key moving averages:
Rates are high, the equity indexes keep going up and are driven mainly by 3 or 4 stocks. The Mag7 aren’t even the Mag7 anymore.
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