A month ago the market crashed, this was partly due to the unemployment rate, non-farm data and manufacturing PMI fuelling recession fears.
This data is once again coming out next week (03-06 Sept).
Only a month ago we witnessed the perfect storm for the global speculation market.
Over 3 days, July 31st-August 2nd, the market went from spooked to outright panic.
Wednesday July 31,
The catalyst was Japan increasing interest rates, that was followed by the Fed holding interest rates at 5.5%.
Thursday-Friday, 01-02 Aug,
The market panicked as the unemployment rate hit 4.3% and triggered the Sahm rule
The Non-farm employment came out 60k lower than forecast.
Manufacturing PMI read lower once again.
The bad news was very bad news!
The market reacted.
The VIX(volatility index) skyrocketed, reaching levels only seen during Covid and the 2008 financial crash.
The global stock markets also witnessed a fire-sale.
The S&P500, the Nasdaq and The Nikkei all sold off.
Notably all have since recovered all those loses.👇
The Russell 2000 which is an index of US small-cap stocks also sold off and has also mostly recovered.
I feel that the Rus2000 is the most closely correlated stock Index to Bitcoin or Crypto when it comes to economic sentiment, Small cap companies are more effected by restrictive monetary policy, higher borrowing cost or economic worries.
Bitcoin and the Rus2000 shared similar price action in the weeks before July 31st and then shared a similar crash, The Rus2000 like other indexes has recovered far better than Bitcoin or Crypto in general.
A lot changes in a month, 30 days ago we saw a fire-sale and widespread panic across the market, now the whole market is pricing in soft landing.
The DXY (dollar strength) plummeted as the market priced in 50bps cuts in September.
Recent data has made a 25bps cut more likely and the DXY has recovered slightly.
A 25bps cut in September is now priced at 70%.👇
All of the above is pointing to a soft landing.
Crypto has not shared in this sentiment.
Last week i posted that i expected mildly Bullish conditions, i expected the Total Crypto market cap to test the upper part of the channel in the image shown above (Total).
I was clearly wrong.(Sorry)
My view was based on how the wider market was taking the economic data and narrative, crypto, like stocks, is just speculative investing, crypto is just more unregulated and higher up the risk curve.
So is crypto undervalued, or is it the canary in the coal mine?🤔
Since March a lot of the price action in crypto has been determined by data that points to interest rate cuts, recently that has turned to data that points to interest rate cuts without a recession.
The data over the last month has shown that a recession is not likely, also that the long awaited easing cycle will begin soon.
Great news for crypto…
So why is Crypto not Bullish?
Going by wider market sentiment it should be, even if retail has been fleeced constantly over the last 3-4 months, large investors should be buying BTC.
Maybe crypto is just lagging...
I personally think that other clear warning signs are still showing that things might not be as “soft landing” as they seem.
The Yen carry trade has resumed, has that money not filtered its way back to the crypto market yet?
Were emergency steps taken by central banks/large bank and large funds to hide the full damage of the Yen carry trade unwind?
Does the market have a false sense of security?
Currently, all things considered, Bitcoin is either undervalued or the wider (stock) market is overvalued.
What happened last month has mostly been forgotten, trillions were wiped out in days, margin calls worldwide, there was definitely widespread collateral damage, until now that has been swept under the rug.
If a soft landing and the start of an easing cycle is the base case for large investors then crypto should be bullish, especially BTC and ETH through ETF investments.
The BTC halving has long passed, the sell pressure from all the bankrupt funds or governments has mostly ended.
If large investors are not buying BTC "at a discount" there must be a reason for it, maybe the money printers and the fiscal stimulus is only able to prop up the stock market for now.
FED-> Large Banks -> Stocks.
The narrative is all soft landing, the major problem now could be the labour market.
The data that fuelled the market crash only 30 days ago will never once again come out this week 👇
Monday is labor day in America, it is a federal holiday, the stock market is closed.
From Tuesday-Friday all readings could have a huge impact on market sentiment and effect the likelihood of 25bps or 50bps cut on the 18th September.
The highest impact readings will be the Non-farm employment change and the Unemployment rate on Friday, these will have a massive impact on market sentiment, and they will also have a huge impact on the chance of a 50bps cut in September.
A 50bps cut is not good for the market if it shows the Fed are acting out of desperation, the current market sentiment is for a 25bps cut in September with future cuts to come, all part of a soft landing.
A bad reading in non-farm(much lower) or the unemployment rate(4.3% or higher) will once again spook the market and fuel recession fears.
Each reading this week has the potential to move the market, the main focus is on the labour market but the Manufacturing or Services PMI will also effect market sentiment and recession fears, especially manufacturing which is below 50 and has consistently declined since April👇
So what’s the play?
For me there is no short term play.
The labour market data is too hard to predict, also it is too easy manipulated.
Just over a week ago the jobs data was revised down by 818 000 from April 2023-May 2024, clearly the jobs data is not accurate.
This close to elections anything is possible, the whole market is now looking to the labour market to confirm a soft landing, Trump and Harris will also be looking to use it in their election campaign
Lower unemployment will be good for Harris, Higher unemployment will be good for Trump, it is a key economic and political talking point.
There is a reason that Crypto is not sharing in the sentiment of other markets, if things were as good as the narrative is saying then large holders would be accumulating.
For now patience is key.
I own Spot, mostly BTC, i have skin in the game, i am happy to see how this week plays out.
If you want to be Bullish/Bearish i would wait to see how the Manufacturing PMI comes out first, it will hold the most weight for the sentiment until Friday.
If we see another large drop in ALTS I will purchase tokens in the re-staking/defi narrative (Mid-Long term spot)
My target range is shown in the Total 3 image below👇 (Market Cap excl BTC+ETH)
Some tokens i am monitoring.👇
I don’t own or endorse any of these projects, most are garbage with little use case, i just think (based on a lot of research) that the next VC push will be in this narrative, retail will follow.
I am not looking to buy any of these tokens now, only if the market sees another large drop.
If price drops into my range for accumulation I will purchase spot, I will not hold indefinitely, I am not a 50x trader, I will hold until I am happy with the returns, always taking into account economic factors and other macro/fundamentals.
This is just my opinion, I am just sharing my plan/idea, as I already mentioned I don’t think most/any of these projects bring anything valuable to crypto, they are mostly VC trash, this is all about playing and trying to beat the zero sum game.
DYOR/NFA bla bla👍
"The big money is not in the buying or selling, but in the waiting." - Charlie Munger.
Dont be this guy👇
Trade Safely.
Peace.
Update 02/09.
From what I have read,
The Manufacturing PMI is expected to be 47.3%.
Services PMI as forecast (51.3) or 0.2% lower.
Unemployment rate 4.2%.
Hourly earnings 0.3%.
NON-Farm 155k-160K.
Unemployment claims 230k.
All of the above could be far off, it is just what i have read.
All the jobs data can be manipulated, higher or lower, it happens (Politics).
#CryptoMarketMoves #SahmRule #Market_Update #TelegramCEO #BTC☀
