Macro Backdrop Starts To Setup Crypto Narratives Again

While the markets have broadly been subdued, it is important to note that the current situation presents an opportunity for investors to reassess their portfolios and make strategic decisions.

Macro Backdrop Starts To Setup Crypto Narratives Again

Global markets have been trading in a tight range as investors keep a watchful eye on the ongoing discussions surrounding the potential raising of the debt ceiling in the United States. The situation has created a lull in the markets and extended to major cryptocurrencies, which have been unable to break out for the fourth straight day.

Despite softer than expected retail sales in the US, markets have remained quiet and are poised for a potential breakthrough. Investors are keenly waiting for any developments surrounding the debt ceiling, which could have a significant impact on the global economy. We are optimistic congress will come up with a solution in the short-term and help the markets rally for some opportunistic gains.

While the markets have broadly been subdued, it is important to note that the current situation presents an opportunity for investors to reassess their portfolios and make strategic decisions. With the markets in a holding pattern, now is the time to do research and analysis, to ensure that investment decisions are well-informed. The crypto market has been correlated with the traditional market from a risk-on/risk-off perspective. However, some sectors and protocols have been unfairly impacted despite the tremendous amount of building happening under the hood. The risk-reward profile for some protocols have become more attractive therefore we have been increasing our position in preparation for the next bull cycle.

The price of Bitcoin remained within a narrow range of $500 between $26,850 and $27,300, with most of the trading day consolidating around the $27,000 mark. At the time of publication, Bitcoin was trading at $27,100. The nearest resistance level for Bitcoin is $28,000, while the closest downside support is $25,750. Meanwhile, Ether also traded within a range but performed better than Bitcoin, gaining against its larger peer. Ether hit a low of almost $1,800 before recovering to $1,835 and was trading at $1,825 at the time of publication. Understanding Bitcoin and Ether price action allows us to better understand crypto-beta and the long tail assets in our portfolio.

Also in our recent analysis, Bitcoin's volatility around the release of U.S. Consumer Price Index (CPI) data has decreased since November 2021, although it still remains higher than the average for the month. This decrease in volatility can be attributed to inflation becoming more predictable, with economists accurately predicting four out of the six past core CPI numbers. Even though inflation remains above target, the lack of an unexpected increase allows the U.S. Federal Reserve to pause its aggressive monetary policy hiking. However, the intraday volatility of Bitcoin has been increasing this year, indicating growing uncertainty around other risks. The ongoing turmoil in U.S. regional banks and the highly publicized debate on the U.S. debt ceiling are negatively impacting risk sentiment as mentioned above.