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SwissBorg MacroScope - 19th February 2024

SwissBorg MacroScope - February 19th

Not buying, not selling, just surfing

Not buying, not selling, just surfing
Not buying, not selling, just surfing

Another week of strong ETF inflows

In the past weeks, we've observed a significant increase in interest in Bitcoin ETFs. Last week marked the largest net inflow into the ETFs, averaging $450 million per day.

At the current price, this represents around 9,000 Bitcoin that needs to be purchased everyday by various ETF providers. When we compare this figure with the number of newly mined Bitcoin per day (900), we notice a clear marginal imbalance in demand and supply, likely serving as one of the primary drivers behind the recent price actions.

Another week of strong ETF inflows
Source: BitMEX Research

Recent CPI release

The CPI numbers are an important macro variable to monitor because it tells us a lot about whether the Fed is ready to pivot, or in simpler terms to start cutting rates. 

Recent CPI release

This week, the CPI came a bit higher than projected at +3.1% YoY versus +2.9% expected. This adjusted market expectation and as of now, the market expects less than 4 rate cuts this year with the first one expected in June.

Target rate probabilities for 12 Jun 2024 FED meeting
Source: CME FedWatch

However, crypto doesn't seem to care at all about this little stepback in managing inflation and continues its strong momentum, up 23% MoM.

Crypto doesn't seem to care at all about this little stepback in managing inflation and continues its strong momentum, up 23% MoM.

Is market dynamics shifting? 

Since the 2022  FTX crisis lows, we’ve been in a strong uptrend and experienced 4 corrections - retracing between 16-23%. 

Is market dynamics shifting? 

When comparing those recent dips to those in prior cycles, we observe that corrections are smaller today than in the past. For instance, we experienced 4 major corrections in 2017, all exceeding 30%. Our view is that the arrival of TradFi in crypto is changing market dynamics, leading to reduced downward volatility.

Furthermore, in previous cycles, the pre-halving period, similar to the one we are currently in, typically involved a consolidation, both in time and depth. However, recent price actions have deviated from the traditional 4-year cycle, and we observed a breakout of the pre-halving consolidation. This is the first time occurrence of such a phenomenon.

we observe that corrections are smaller today than in the past.
Source: Twitter - nestayxbt

Again, it seems that the market is moving earlier than in the past cycle. This could be justified by the arrival of the ETFs. Going forward, we can envision two scenarios: 1) the bull market is simply starting earlier as TradFi is trying to front-run the 4-year cycle theory around the halving, or 2) the supercycle theory might be relevant today, and we might witness a much longer secular bull market as Bitcoin adoptions grows.

If the market experiences an acceleration in the next few months and starts to go parabolic, scenario 1 may become more probable. Conversely, if the market cools down, we could envision the cycle lasting much longer.
Source: Thy Strenght Befits Bitcoin

Retails are not in yet

Ultimately, crypto is a game of attention and monitoring “Google searches” provides a reliable method to spot trends and gauge the interest of the average guy for crypto. Typically, a cycle peaks when retail investors become euphoric and discussions about crypto become widespread.

Well… the current figures show that we are far from this scenario. The “Google search” interest index is currently below 20 despite Bitcoin comfortably trading above $50k, up 25% since the beginning of the year. In contrast, the last time Bitcoin was trading at $50k, the “Google search” interest index was at 70.

Bitcoin search volume to price ratio
BTC Google search

The main takeaway from this is that retail money has not come into the market yet. We are still early and the biggest opportunity is still ahead of us. 

Source: @yassineARK

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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