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SwissBorg MacroScope - April 8th

SwissBorg MacroScope - April 8th

Another run on the horizon

Another run on the horizon

We’ve had another week of consolidation in Crypto land, with Bitcoin still ranging between the $60-73k range. So far, this correction is healthy and in line with our expectations, especially as we are at previous ATH levels, which are difficult barriers to break. 

Our base scenario is still a breakout to the upside of this range and a continuation of the bull market. We expect this breakout to happen anytime within the next few weeks. This scenario would be similar to what happened when Bitcoin broke its previous all-time highs back in December 2020.

December 2020 Bitcoin
Source: Will Clemente

Important crypto indicator to keep an eye on

We believe that a continuation of the bull market is the most likely scenario and here are some important fundamental metrics from Capriole Fund to assess where we are in the cycle:

Holder Growth Rate: This metric peaks when Bitcoin's diamond hands start selling their coins. In past cycles, market tops occurred 6-9 months after the "Holder Growth rate" reached local highs. As of writing, we are 3 months into this.

Hodler growth rate
Source: Coinank

Bitcoin Heater: Long periods of extreme funding data were a good sign of market tops in past cycles. Currently, the funding data are far from what we saw in 2021.

Bitcoin Heater

Net Unrealised PnL: When this metric enters the Euphoria zone (75% of participants in profits), this is usually an early signal of a market top. For the moment, we are not there.

Net Unrealised PnL

Mayer Multiples: This is a technical indicator for Bitcoin. It is calculated as the price of bitcoin divided by the 200-day moving average. At 1.6 today, we are still far from the 2.0 threshold, which often correlates with cycle tops. According to the Mayer Multiples , there should still be some room to run.

Mayer Multiples
Source: Charles Edwards

An update on ETF flows

Bitcoin ETF flows have emerged as a critical metric for assessing the overall dynamics of the crypto market. After a slowdown in inflows with the first week of net outflows from March 18th to 22nd, it seems that inflows are restarting their uptrend. To date , the different ETFs have seen over $12.6 billion in net inflows.

Bitcoin spot ETF total cumulative flow
Source: Farside Investors

Monitoring the Fed Pivot

As discussed in length in previous Macroscope, the first Fed fund rate cut is an important macro event to monitor. This will be influenced by two main factors, price stability (which implies inflation at 2%) and economic growth (with employment data as the best proxy for that).

Let’s analyse those two variables to form an opinion on when the first rate cut could take place.

YoY CPI: Looking at YoY CPI , we are still above the 2% target set by the Fed. This is still putting pressure on the Fed to not start cutting until its mandate of price stability is achieved.

Source: tradingeconomics

Employment data: Recent employment data came stronger than expected with an unemployment rate of 3.8% versus 4.9% expected and +303k jobs added versus +200k expected. This is a signal of a strong economy and the likelihood of a rate cut is decreasing day by day. As of writing, the market prices a rate cut at 46% for June.

Employment data

However, this is not a problem and the market doesn't seem to care about the change in expectation of rate cuts. Crypto, equities, and commodities are still in a bull market. 
One of the reasons behind that could be the shift in attention of market participants from monetary policy to the fiscal side of the equation, especially as the US Treasury is urgently seeking solutions to roll over their debt. We believe that this marks a structural change in markets, which we refer to as the era of fiscal dominance. When we take this into account, we observe that liquidity is already being injected into the system .

The US Treasury is urgently seeking solutions to roll over their debt
Source: Fejau

Our Long-Term in-House View

  • We are in a bull market and we expect to see BTC > $100k, ETH > $10k and SOL > $500 as new ATH in the next leg of the cycle.
  • A dovish stance is starting to appear on central banks' sides and global liquidity is in positive territory. Long term, this is bullish for crypto assets.
  • We believe in ETH as the superior asset to Bitcoin for the next decade. Further, our view is that SOL has the biggest potential for consumer app adoption.
  • Our favourite altcoins thematics for the next upleg are Socialfi, Gamefi, DePIN, AIfi & Infrastructure for scalability.

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