Shorting BTC heading into a major economic contraction
Updated
Ignore the RSI, that's there by accident.
I might continually post updates below regarding additional macro economical analysis.
There really isn't much to explain, the writing is on the wall.
We've just hit the highest interest rate since the year 2000 and FED isn't even done hiking yet, 80% chance the final hikes comes through in November.
BTC is a risk-on asset that runs on cheap money. With the increasingly growing share of institutional investors and traders in the space, crypto has become increasing correlated to equity markets, as evidenced in for example "The Crypto Cycle and US Monetary Policy" (Natasha Che, Alexander Copestake, Davide Furceri, and Tammaro Terracciano).
Crypto markets are very heavily dollarized, thus they respond the US monetary policies much more strongly than other major parts of the world's monetary policy. Monetary policy channel differs from the overall macro-economic channel, and thus for example in Europe, it might not be the ECB's rates causing downward pressure on crypto, but rather the economic contraction itself caused by ECB's rates that puts downward pressure on risk-on assets.
Money will flow out of risk-on assets first (into T-Bills, which is already happening, and eventually commodities), and BTC is as risky as it gets, even more so than bubblicious AI-tech stocks.
I might continually post updates below regarding additional macro economical analysis.
There really isn't much to explain, the writing is on the wall.
We've just hit the highest interest rate since the year 2000 and FED isn't even done hiking yet, 80% chance the final hikes comes through in November.
BTC is a risk-on asset that runs on cheap money. With the increasingly growing share of institutional investors and traders in the space, crypto has become increasing correlated to equity markets, as evidenced in for example "The Crypto Cycle and US Monetary Policy" (Natasha Che, Alexander Copestake, Davide Furceri, and Tammaro Terracciano).
Crypto markets are very heavily dollarized, thus they respond the US monetary policies much more strongly than other major parts of the world's monetary policy. Monetary policy channel differs from the overall macro-economic channel, and thus for example in Europe, it might not be the ECB's rates causing downward pressure on crypto, but rather the economic contraction itself caused by ECB's rates that puts downward pressure on risk-on assets.
Money will flow out of risk-on assets first (into T-Bills, which is already happening, and eventually commodities), and BTC is as risky as it gets, even more so than bubblicious AI-tech stocks.
Note
I've also analyzed the pattern that plays out every cycle and going by that pattern alone, we've not hit bottom. At the absolute best case scenario, 16k needs to be retested, with $14-12k being likely, 10k being somewhat wild but still plausible depending on how much of a domino effect will the monetary contraction with a possibility of slightly below 10k being the absolute bottom (probably a quick scam-wick down and a quicky recovery to 10k)Note
Also keep in mind that2) Is already happening, sort of
3) Is already happening, median price of house sales is in freefall, and case-shiller should follow suit
Regarding 4) recessions typically start not when the T10Y3M inverts, but when it ticks back up to a positive value. We'll get there somewhere between January and March (My money is on February) and that's when the party will really get started. I don't see BTC going below 20k for the rest of 2023
Note
T10Y3M started spiking almost vertically, we might get an un-inversion as soon as end of October (Realistically mid-November)Much earlier than I anticipated based on the previous trendline in T10Y3M
Looks like the show *might* be getting started a few months earlier than originally anticipated, especially with all these delusional narratives about "soft landing", "strong consumer spending", "great economy" and "traditionally strong Q4 season"
Note
US Job openings came in much stronger than expected => Another 25bps hike is practically guaranteed unless the markets manage to start hyper-shitting the bed by then (won't happen)Think the final hike will be what gets this show on the road, especially as some of the yield inversions will un-invert right around the same time
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