When it comes to the current macro-economics sphere, we read and hear mainly bad news related to high inflation, the war in eastern Europe, problems in supply chains, and high energy and food pricing leading to a bear market in the equity, bond, and crypto markets.
As the fear is mounting, many investors are selling their on-risk assets and moving a significant portion of their portfolio position to cash. That, together with the hawkish monetary policy of the Federal Reserve and the recent series of interest rate increases, has moved the DXY (Dollar Index) to an all-time high that hasn’t been seen in 20 years.
While the dollar is strengthening its position vs. other currencies, we start seeing a slow upwards move in the crypto space as well. On the 18th of June, Bitcoin was traded at the level of $17,500 and since then recovered slightly and is up more than 15%. Also, layer 1 coins such as Avalanche and Solna are up more than 20% since a month in June.
The GSG index which is a benchmark commodities index that tracks the performance of the global commodities market has fallen more than 10% in recent days and the US 10-year bond is trending down for about 3 weeks as well. All of these indicators may signal a narrative change and that the market fear of recession may now be higher than the fear of inflation.
In fact, we start seeing the results of the Fed actions of the last months and people are spending less than they used to and the inflation may be coming down in the next 2 or 3 months as I estimated in my article’s last month “When will the crypto winter will be over?” . If that is the case, we may even get a lower than expected Consumer Price Index (CPI) figures which will be announced next week on the 13th of July and that may trigger a relief rally in the on-risk assets including cryptocurrencies.
Furthermore, in recent days, the cryptocurrency market flashed green recording an uptick both in terms of daily and weekly charts. That may lead to an upward revision soon. I am not sure that we are seeing the end of the bear market but possibly a considerable relief rally that may lead Bitcoin back to 30k in the coming period.
All of the above is of course not certain and there are still many uncertainness in the market related to the liquidation cascading effect seen in the crypto space in recent weeks. If one of more of those companies that are under pressure to sell assets will be forced to enter full liquidation, the sell pressure will come back fearfully and the market may experience again a new market crash. Still, with an increase
willingness of firms with strong balance sheets such as FTX and Binance to bail out companies, it looks as the chances for another market crash triggered by deleveraging in crypto land is getting smaller.
In the meanwhile, our investment strategies have been performed relatively wel during the last 30 days and while Bitcoin went more than 35% down, all of our active strategies maintained a modeste gain or loss adhering to our promise to protect our customers during bad times.
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