Rapture #150: Recent Price Action

Rapture #150: Recent Price Action

In the past two days, the crypto market has been on a tear. Bitcoin is up approximately 13% from its low on the announcement that Russia was invading Ukraine, while the rest of the market is also experiencing similar price action.

While I am far lass concerned about the market's price action than I was a couple weeks ago, this sharp v reversal does have the potential of being a bottom if BTC begins to be treated as a hedge against global uncertainty in the near term.

So, why did was there a sharp reversal in the past couple days, especially when there is so much market uncertainty?

The answer is much easier to figure out then what the market does next: shorts were liquidated.

Most shorts liquidated since December 3rd

More than $340 million worth of shorts were liquidated in the past 24 hours, which is most since December 3rd. Clearly, shorters were caught off side when the market was pushed up post war announcement, leading to a nice short squeeze that pushed the market higher.

The short liquidations led to a nice pick up in 24 hour volume for BTC, which hit above $40 billion for the first time in many weeks. Volumes has largely gone back to where it was before the squeeze, with 24 hour volume standing at just under $30 billion.

What happens next

Short liquidations usually don't paint a clear picture of what happens next. For there to be a sustained trend reversal to the upside, I would like to see volumes increase into rising prices. I personally think this squeeze is much more likely to be a fake out in terms of turning into a new upward trend.

With the March FOMC meeting coming up and changing war developments, I still prefer to be heavily in cash.

That being said, famed economists, such as Mohamad El-Erian, believe that Russia's invasion of Ukraine has completely changed the picture in regards to rate hikes. El-Erian believes that a 50 bps rate hike in March is now off the table, as are the 8 - 9 rate hikes planned for this year.

I don't buy that argument. I don't understand the logic. Is it that the market has gone down now and the Fed is scared of causing a recession by raising rates? It wasn't outlined clearly, but if you hold El-Erian's viewpoint, would love to hear your thoughts.

I still think the #1 issue on voter's minds in the US is inflation, and that it is politically unfeasible for Biden to not push Powell to be aggressive.

I am prepared for a ton of volatility in the coming months, with no clear indication on where the trend resides.


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