TA Tuesday: Crypto Performance, Macro Insights, and Strategic Outlook


Week-over-week performance:

  • BTCUSD: 42,992 / +2.44%
  • ETHUSD: 2,249 / +0.58%
  • US10Y: 3.92% / -27 bps
  • DXY: 102.47 / -1.35%
  • GOLD (USD/OZ): 2,024 / +1.81%
  • NDX: 16,729 / +3.13%
  • VIX: 12.57 / -0.55%

On the macro side:

Last week, major central banks opted for a rate skip, highlighting the possibility that the “longer” in the “higher for longer” scenario might not be as lengthy as anticipated. 
While the US CPI slightly exceeded expectations, the overarching narrative suggests a decline in inflation and a robust job market – what else could one wish for during this festive season?

The demand for long-term treasury remains robust, with the US 10-year yield finally dipping below 4%. 
This, in turn, led to a weakening US dollar and propelled equities towards historic highs with very low volatility.

In my view, this scenario continues to be ideal for capital markets: certainty reigns. 
I maintain my optimistic view: we are poised for a delightful Santa rally as we approach the end of the year, propelling the SPX and NDX to all-time highs. 
This optimism is bolstered by a relatively light economic calendar.

Looking ahead: 

  • Tuesday 19: EU CPI, US Housing Permits
  • Wednesday 20: UK CPI, DE PPI
  • Thursday 21: US GDP, US Jobless Claims
  • Friday 22: UK GDP, US PCE

On the FX side:

As expected, FX volatility made its presence felt, culminating in the DXY hitting my predicted lower target of 102.22 amidst discussions among major central banks. 
With the EURUSD teetering around the double top at 1.10, I find myself favouring the USD again, contemplating a DXY around 103.5.

Despite the anticipation of decreased demand due to lower yields, I maintain the belief that the US is positioned to sustain higher yields compared to other economies. 
On a portfolio level, while I foresee an uptick in risk assets, including crypto, the US dollar remains an appealing hedge for non-US investors.

Chart 1: DXY 1d

On the crypto side:

Even as realised volatility remains relatively subdued, with BTC’s 30-day RV at 47%, the day saw frequent instances of flash crashes and pumps. 
I maintain the perspective that those who positioned themselves in anticipation of a potential “God Candle” upon SEC approval of ETFs are likely holding firm until at least January, regardless of market fluctuations.

This leads me to a dual conclusion: a BTC breakthrough above $45k should be attributed to either unexpected positive news or an equity rally – let us say .6 Beta. 
Conversely, a dip below $41k, in the absence of negative news or a risk-off sentiment in traditional markets, presents a buying opportunity and is indicative of a potential short squeeze.

Currently, I favour range trading and accumulating with short-volatility strategies into the new year.
Despite my belief in limited upside until year-end, a breach below $39.5k could swiftly ignite the market.

Extending these insights to the broader market, I anticipate the crypto total market cap to fluctuate between $1.63 trillion and $1.48 trillion as we approach the year-end.

Chart 2: BTCUSD 1h

Chart 3: Crypto Total Market Cap 1d 

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