Undoubtedly, the phrase that “the market always puts you in the right place” is not rhetoric, and events that remind us of this appear periodically.
We have spent weeks with a dangerous dynamic for the bulls, in what could be defined as a listless market, without strength and with little movement. This is something that the crypto asset market does not have us used to but that we may begin to see in a more common way
Our theory is that we are seeing significant changes in the behavior of the crypto asset market investor, basically because it is changing its profile. Things are very different compared to 2017, in many ways. And without a doubt, a reduction in volatility is going to be beneficial and convenient.
The toll that this supposes, is to find you sometimes in situations like the one we are experiencing these days.
Loss by no-show
The closest term to what happens could be “no-show” That is, the market has ended up falling, not because of an intense and determined bearish force based on some event that may have happened, but because there was no bullish alternative in the market.
Naturally, like all movements that occur, the presence of a trigger is necessary. In this case it was the publication of the minutes of the FOMC, on January 5. From that moment the bears appeared and dragged prices down
The long hand of the Fed
Without a doubt, this would be another of the headlines that we can extract from the current situation. We have seen again that macro events in the global economy also affect the crypto market. This is not exempt from the influence of monetary policy managers (see Federal Reserve), which is still paradoxical in the case of a decentralized proposal such as that of most crypto assets.
This, I suppose, must also mean an improvement in morale in the FED, which can verify how its influence on all economic activity persists, no matter how decentralized it may be.
The fact is that a single mention of a possibility of a monetary policy tightening has been enough. Close coupling measures of interest rates to the current macro situation, and possibly most importantly, an obvious concern about inflation levels, have caused cryptoactive prices to fall.
BTC: At October levels
Despite the headlines that we can see, the real situation is that we have BTC at the levels of October 2021.
We can see it in this graph that we have put in daily timeframe. The generation of a new minimum will allow us to draw a new movement guideline to calibrate the state of the situation, but without a doubt, the level of uncertainty is high at this time and due to different circumstances.
ETH suffers the most in the fall
Ethereum has been the hardest hit in this slide, which has dispelled the impression that it had gained confidence among investors. We can see how the fall has been more pronounced if possible than in Bitcoin, just by examining its graph. The confirmation is obtained from the dominance data.
It is evident that in this sense, Ethereum is still several steps behind Bitcoin. Another example of this is that the whales in this bearish movement have accumulated Bitcoin, and in a much less significant way, Ethereum.
No variations in long-term strategies
The current situation should not cause notable alterations in the long-term strategies, or holders of crypto assets, although surely a reconsideration of its purchasing policy to make the portfolio grow, which should be postponed or moderated until the scenario clarifies a bit.
And it is that in these situations haste is a bad advisor. It is also true that prices are now unbeatable for the acquisition of long-term assets. The risk profile of each investor is what should determine the entry point.
Defi suffer strong setbacks
In this context, the assets with the most setbacks are those of the Defi market.
We can see how this week all the outstanding assets are in the red.
Lesson learned: keeping an eye on the FIAT market
With the lesson learned, we began to directly monitor the traditional market, which is currently in an area of uncertainty due to changes in monetary policy. An excellent way to carry out this long-term monitoring is to examine the price of the 10-Year Bond and its evolution.
In the attached graph we can see how highs in the profitability of this bond have been a clear sign of strong downward movements in the Equity markets. And experience tells us that when this has happened, we have seen declines in the crypto market.
Therefore, one more graph to control and monitor closely…
We did not want to close this post without making this little reflection.
For those of you who don’t know, the term DYOR refers to Do Your Own Research.
Never trust ABSOLUTELY AND BLIND your assets to others. Do it to improve your results and take advantage of the knowledge and expertise of professionals, but always with a basis and a criterion that allows you to evaluate performance and risk level assumed
The last decision (and responsibility) is always the investor himself.