0xKyle's Market Color #33

The bears have won - failed range breakout on FOMC, and an overall bearish sentiment across the board

gm! hope everyone’s having a blessed Saturday - today I’m getting NYC’s famous Szechuan Mountain House - heard it’s some of the best Asian food in NYC. If anyone has any reccs for restaurants I should try, leave a comment below!

---

Executive Summary 📝

BoldLeonidas on Twitter

So this week was an interesting one. Last week I wrote that the sell-off pre-CPI was overly bearish - in my words: “ NFP → people hawk → but rates cut by ECB → good chance that people are overly bearish. Idk tho. NFA” was what I wrote in the previous article.

The interesting thing was - I was half right. CPI came in cooler than expected, which caused markets to rally - any long pre-CPI was essentially deep in profit, just like the previous FOMCs. Husslin very kindly explains the technicals behind the trade here:

But what caught the entire crypto market offside was its reaction to the FOMC news. The Fed raised its 2024 inflation Forecast to 2.6% from 2.4%, and only showed one rate cut in 2024 vs 3. While seemingly bearish, QQQ found itself ending the week up 3.75%

The trouble that plagued crypto investors wasn’t so much the news itself, but the reaction of the crypto market to the news - while tech stocks found themselves ending the week higher, Bitcoin couldn’t break its range highs of 72k, and market dumped on FOMC itself, ending the week down 4.7%.

This dispersion in performance has caused the entirety of CT to go into a frenzy. The sentiment in Crypto Twitter is extremely bearish, and I can’t blame them - as the most “risk-on” asset in the world, the fact that BTC pretty much went in the opposite direction of tech stocks this week is pretty concerning.

Some people are speculating BTC miner capitulation for this dump, while others are talking about how Terraform may be selling BTC to pay for its settlement - whatever the case, it has caused many traders to flip bearish on what was supposed to be a potential range breakout of ATHs.

I personally flipped bearish post FOMC upon seeing BTC’s reaction to the news versus QQQ’s price action - but I’ve written this in my telegram channel:

Essentially, I am a LTF bear, but mostly on alts; and I’m looking to still re-take the long BTC/ETH trade. The way I see it, BTC (and soon ETH) have structural bids which set it up for price appreciation on higher time-frames. I can’t make the case for many alts though - and whilst some may argue “scams pump the hardest”, or “this is such a late trade to take” - the fact of the matter is, there’s too little liquidity in the system to sustain many current alt prices still, and as the summer chop continues, I see liquidity continuing to go down - and thus, alt prices as well.

The other salient point to remember is that - being a flows-driven cycle through the BTC ETF, trad-fi institutions don’t actually care about alts ; the trad-fi people I’ve talked to do show an interest in accumulating BTC for their long term portfolios / as a way to get that assymetric upside, but no legitimate trad-fi institution is here to buy your alts.

The liquidity in alts pretty much sit atop on a large group of degenerates, bubbled further by leverage - and what goes up must come down. No one admits it, but the time of reflexive upward returns were Jan - March: most CEX alts repriced upwards, with many of them doing 3-5x’es or more.

And now, we’re beginning to see the other side of the trade - as perp traders unwind, many alt prices will crash without a sustain bid to catch the knife. “Retail is coming” is entirely cope - retail came and went. If 100 D-tier celebrities coming to shill Solana shitcoins can’t pump our coins, I’m not sure what will. The usual retail top-signals are flashing across the board, but people are just too blinded to see it.

There will be a time to bid alts though - when it’s oversold. I look forward to that time. To wrap up, I will re-iterate the strategy I’m looking at:

1. Bid BTC / ETH (insti flows)

2. Try to find on-chain opps

3. Short alts

Market Narratives 🎙️

I’m sorry but market narratives really only work on the way up - nothing comes to mind on the way down. Outperformers often get sold off (see ONDO), and so… this section is kinda empty.

On-Chain ⛓️

On-chain is also pretty bad - but there were some good individual pumps:

• $PIRATE - piratenation’s token

• $RCH

• $BANANA

• $ACX

Issue is, many of these tokens sold off as people move to defensive positions to not lose too much money.

Concluding Thoughts

Touch grass, guys. The market is pretty bad right now. There’s a time to be risk-on, but if you’re risk-on 100% of the time, that’s how you lose it all. As a very good trader friend of mine told me once: Don’t look at the peak to trough, look at the trough to trough - as long as it’s up, you’re on an uptrend. (h/t Ernest)

There are always opportunities in the market. Chill, reset, and come back stronger.

---

DISCLAIMER: The information provided in this document is for general informational purposes only and does not constitute financial, investment, or legal advice. The content is based on sources believed to be reliable, but its accuracy, completeness, and timeliness cannot be guaranteed. Any reliance you place on the information in this document is at your own risk. The document may contain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied in such statements. The author(s) of this document may or may not own positions in the assets or securities mentioned herein. They reserve the right to buy or sell any asset or security discussed at any time without notice. It is essential to consult with a qualified financial advisor or other professional to understand the risks and suitability of any investment decisions you may make. You are solely responsible for conducting your research and due diligence before making any investment choices. Past performance is not indicative of future results. The author(s) disclaim any liability for any direct, indirect, or consequential loss or damage arising from the use of this document or its content. By accessing this document, you agree to the terms of this disclaimer.