December 9, 2021
Waiting For Macro Clarity
Yesterday’s surprisingly bullish congressional hearing (more on this in Elliot’s last video) didn’t have much impact on the crypto market. After the strong bounce earlier this week, the market is now consolidating and looking for direction.
With the stock markets shaky ahead of tomorrow’s inflation data release and – even more importantly – the FOMC (Fed) meeting coming up next week, the current choppy price action will likely continue for the time being.
Side note: We know we have been talking a lot about the stock markets recently, while we would prefer to just focus on crypto. However, the impact of the macro climate on crypto has been super strong as of late and the current environment just doesn’t provide fertile ground for risk-on assets (like altcoins). This will change again at some point, of course.
As outlined yesterday, Bitcoin dominance is currently retesting critical support levels. The outcome will determine whether we get an alt season of epic proportions (rather unlikely the way most charts look right now) or a strong Bitcoin move (to either the down- or upside) that mutes altcoins for a while.
In the current uncertain climate, the likelier scenario is that altcoins will take the backseat for a while until we reenter a risk-on environment (likely after a Bitcoin breakout and/or when the macro headwinds ease).
Something to keep in the back of your head is the fact that stock (and crypto) markets are hovering below all-time highs after a years-long bull market. While the base case is that this asset party continues for the time being, the risk of a downturn is there – especially given the fact that stock investors seem to overlook slowing economic growth while inflation is still sky-high… Entering a potentially stagflationary environment wouldn’t mean good things for stocks in the months ahead.
This doesn’t mean that crypto always has to be correlated with stocks, but generally, we should be aware of the potential headwinds.
Early signs of the headwinds the global asset rally is facing are well outlined by macro analyst Mohammed El-Erian:
One of the charts you should observe closely to spot a potential storm in the stock markets as early as possible is… Apple stock, with the ticker $AAPL. You can see in the chart below that Apple’s stock price has gone absolutely parabolic in the last years.
In fact, Apple (and a couple of other tech stocks like Facebook and Google) supported the US indices strongly in the last few years and made them appear “healthy” – while the majority of stocks actually didn’t do so well... Some of the most intelligent macro investors argue that you should better prepare for the worst once these tech names turn around.
One could argue that the stock markets would have already been in a bear market for quite some time if it weren’t for the easy “Fed money” flowing into a few “mega-caps”…
Another good friend of the markets has again reared his ugly head today: Evergrande. With the official announcement of Evergrande’s default, this is the beginning of the end of this saga... While we still have to wait and see if there will be ripple effects emerging from Evergrande’s downfall, for now, the markets seem to care more about the billions of liquidity the Chinese government has injected into the markets… Definitely, a story to watch in the near term though.
WhatsApp Integrating Crypto Payments!
While we already knew that Facebook has been working on crypto projects for quite some time, it’s nevertheless huge news that Facebook (I just can’t say Meta yet…) is trialing crypto payments through WhatsApp, one of the world’s largest messaging apps with over 2 billion active users worldwide!
For now, the feature will be trialed with a limited number of US users but imagine how huge it would be for adoption if 2 billion people get easy access to crypto… 🤯
Let’s see if regulators in the US and internationally push back on Facebook’s crypto plans – again.
If you think about it: One of the largest tech giants in the world rolling out crypto features, while being a massive step for adoption, inherently also raises critical questions: How strong will Facebook’s grip on crypto become, how about the lingering privacy concerns and is this step really good overall for the decentralized ethos of crypto? Time will tell.