Crypto Breakout
Disclaimer: Your capital is at risk. This is not investment advice.
ByteFolio Issue 86;
Why are Bitcoin and crypto so strong? The quick answer is the outlook for lower rates, which has weakened the dollar, but there’s always more to it. We haven’t had enough rate cycles to be sure, but rate expectations have turned down, and Bitcoin has rallied, just like it did in 2019. But there are other factors, such as April’s halving, the spot ETF launch, and above all, we seem to have run out of scandals. It all comes together nicely.
Bitcoin and Rates
But it’s also important to understand that Bitcoin surged in 2020 and 2021 when bond yields rose sharply. That’s because it was a risk-on environment, just like in 2016/7. Spurious correlations, perhaps, because it seems to work both ways. But perhaps rates aren’t that important because they only seem to matter at extremes, i.e. when crypto is either too hot or too cold. After last year’s hell, it was too cold, but with Bitcoin now above $40,000, it is surely closer to neutral.
Checking in on the deviation from the 90-day moving average, it’s +49% over. But then, considering the 5-year average is +36%, it’s not too bad. Plenty more to go yet!
Not Exactly Overbought
