- February 17, 2023

Crypto volatility back with a bang

This Daily Digest will cover:

  • 💥 Crypto volatility back with a bang
  • 🇺🇸 US inflation data all higher than expected
  • 💵 USD and yields higher
  • 📊 Stocks too high?

The end of a wild week is upon us and there will be more than a few people eyeing up a weekend break.

The data out of the US has been strong, worryingly so. CPI and PPI have both surpassed expectations and the rhetoric out of FED officials has ratched up a notch with talk of 50 Bps hikes back on the table. The USD has been the big winner in what has been a far from straightforward week, and Euro is trading 1.0640 and GBP back near its lows of the year. With US yields moving higher this move makes sense and there seems little in the way of reasons to fight it. I like buying any USD dips at the moment should we get some profit taking into the weekend.

Crypto has frankly been frantic over the last 48 hours. Huge buying of BTC in particular saw the price rise from 22300 to 25200 in no time at all with ETH following suit to trade above 1700 and looking set to accelerate. The issue was the timing of the move. With the macro environment the ingredients were there for a short squeeze but not a sustained move and the rejection of 25000 has prompted an equally swift and vicious sell off back to 23500. Whilst every fibre of me wants the move higher to be sustained, I suspect it won’t just yet until we see a broader risk market rally.

Speaking of the broader risk market I fail to see how stocks can rally from here. The data is against it. The seasonal trends are against it. The interest rate market is against it. I think we are going to see a slump over the next few weeks of 5% plus before we can even think of reestablishing the rally. The caveat here is that the main buying this year has been retail traders forcing short sellers of stocks like Tesla and meme companies to run for cover. I don’t think they can sustain buying with the current backdrop but the market can stay irrational far longer than I can stay liquid so never say never!

Good luck as always!

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