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JPM's Kolanovic strikes again;
1, low rates leads to institutions rotating out of bonds into equities
2, creates downward pressure on volatility
3, which in turn creates a positive feedback loop where systematic and disc hedge fund strategies increase allocations to equities (this could play put for most of 2021)
4, if current below average exposure goes to historic percentile would result in $550 bn inflow from systemic and hedge fund strategies
5, add forgotten buybacks to the mix and Kolanovic argues for their 4400 SPX px target.
Below chart shows that average VIX levels closely follow levels of interest rates with a ~18-month lag. Conclusion is basically;
"Given the significant increase of monetary accommodation 9 months ago, we expect it to pressure volatility for most of 2021"
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Did it ever work as an inflation hedge, or was it just a pure coincidence? Anyway, with break evens falling to new lows since February, even the ETH bulls are realizing they don't need ETH as an inflation hedge...
If ETH is the aggregate psychology of this market, then this latest bounce still looks shaky...
Regular readers are familiar with the old vs new internet comparison, basically comparing ETH with FDN. ETH is trading like a Coke you left open for a week. No fizz at all...(ETH log chart)
Still looking for the inflation hedge? Bitcoin ain't one of them, especially not given the fact US 10 year break-evens are trading at the lowest levels since February this year.
Chart showing NVDA vs ETH. MS adds: "Cryptocurrency mining had a dramatic impact on thegaminggraphics markets in thelast 18 months, drivingan estimated 14% of revenuein CY21 butalso substantiallycontributingto a majorgraphics shortage which boosted overall mixand pricing."
Bitcoin has refused to join any of the recent squeeze moves in NASDAQ, but it is making sure to participate on even the smallest moves lower in tech. 20k remains he key support level to watch...
What happened to bitcoin being tech and tech being bitcoin? The longer as well as the shorter term charts show the most recent gap between the two...
Just a gentle reminder of how deep draw downs tend to be in BTC...but riding it all the way down and drawing long term trend lines is not a trading strategy.
Bitcoin's tech correlation perfection has died. The short term gap vs NASDAQ is very wide here. There is no spill over effect from the current equities squeeze spilling over to BTC. Is BTC trying to tell us something?
We haven't seen the ratio of BTC price to intrinsic value this low in a long time...
Bitcoin volatility has come down from the panic highs we saw not long ago, but BTC volatility is all but cheap. One way to play a potential catch up to NASDAQ (see previous post) is entering into covered calls. Obviously this is for the moderately bullish view. First chart shows 1 mth BTC vols. Second chart shows skew across maturities. The panic bid for downside protection is gone, making overwriting upside more attractive from a volatility point of view.
For months you could trade bitcoin vs NASDAQ and "explore" any dislocation. Things have changed somewhat lately. Let's see how things develop from here, but if there is any "tech" to BTC left, the gap vs NASDAQ is getting interesting as a possible short term catch up trade.
The institutional inflow remains absent while momentum continues pointing lower.
Correlation perfection is slightly less perfect, but if BTC is the aggregate psychology of this market, then look closely as BTC refuses bouncing much from recent lows.
If this is the bitcoin bounce, then we are not sure what you should expect if we take out recent lows...The "classical" BTC vs NASDAQ chart continues to trade with a relatively wide short term gap.
The short term gap between BTC and NASDAQ is getting rather wide again. Do we trust BTC or tech. They were supposed to be the same "thing"...
So far the bounce occurred in the lower part of both the long as well as the short term trend channel. This could easily develop into a violent dead cat bounce.
Rate hikes are yikes...at least for bitcoin bulls.
It would almost be too perfect...
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Is BTC still just in the process of "resetting" to tech? Last time NASDAQ was here (including the Friday bounce), BTC was still lower. NASDAQ vs BTC log chart.
BTC is oversold, and ETH even more oversold. We come back to the same argument regarding overbought/sold; assets usually stay in "over" territory for longer than most believe possible. Both these cryptos have stayed in oversold territory for days, and still prices have continued to collapse.
It looks ETH is determined in closing that gap since early 2021, or?
Bitcoin broke below the 20k support like it wasn't a support. Next support areas are to be found around the 18k level and then the 14k area (2019 highs). Note there are two negative trend channels, one huge and one shorter term. Both have the lower part of the channel slightly lower, but charting it here is very hard.
Crypto winter is not cold enough......72 of the top 100 Crypto by market cap are more than 90% down from their all-time highs. Chart shows total crypto market cap (approaching $800bn).
