I am still not convinced we are in a bull market and have escaped the tumultuous nature of evolving macro events. Many areas of the market are signaling the global economy has significant issues. My base case is that recent price action is a bear market rally.
The 2 and 10 year yield curves have inverted, the bond market is crashing, inflation is raging, the Federal Reserve intends to continue with hikes throughout the following couple years, the war between Russia/Ukraine continues, and the Hang Seng Index is down more than 20% in the past year.
Yet undeniably, the US equities market and crypto have been incredibly resilient in the face of major macro headwinds. BTC is up more than 32% from its January lows, the crypto market is getting jazzed up about the Ethereum merge, altcoins outside of the majors are surging, coins held on exchanges is at an all time low, the Mayer Multiple for BTC is at attractive levels, the extending market crypto cycle theory popularized by Benjamin Cowen is gaining traction, unemployment remains incredibly low, US real estate is booming, and the S&P 500 is within around 5% striking distance of its all time highs. Note that the rolling 90 day correlation between BTC and the S&P 500 is nearly at an all time high of .48, as these two asset classes are closely matching each other right now.
My current positioning
So far, the market's recent price action has been telling me that my general concerns are misplaced and I should be more bullish. My large cash position has not been supported by the market's recent price action.
Still, my base thesis is the one shared by Arthur Hayes, which is that more pain for risk-on assets is around the corner and the fact that crypto is viewed as a risk-on asset will outweigh bullish crypto native narratives such as the merge in the short-term.
Then again, crypto could successfully decouple itself from the S&P 500 if the market adapts the merge narrative as its base rather than focusing on the risk-on asset narrative. Many crypto leaders, such as Mike Novogratz, Su Zhu, and Barry Silbert are all bullish on crypto even if equities take a turn from the worse.
How my positioning could change
That being said, I need to account for all circumstances. In the case I change my opinion in the short to medium term to one of a tactical trading stance in order to capitalize on a surging crypto market, I will manifest that view by deploying a portion of my capital into ETH (the merge narrative) and a select few undervalued altcoins that I believe will benefit from the core bullish tailwinds driving the market.
In the next Rapture, I will discuss a handful of altcoins I believe are undervalued and I think will also greatly benefit in a clearly bullish market. Note that, if I deploy capital into these assets, they will be purely tactical positions that I plan to exit on a moment's notice.
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