May 6, 2024|Commentary

What We See in the Markets: Navigating Through Uncertain Markets and Mixed Signals


After spending about a week trading below the $62k level, BTC is back around where it traded a week ago. (BTC is up 1% over the past seven days, while ETH is down 4% and SOL is up 5%.) Crypto price action seems somewhat rudderless at the moment; we are currently trading in the middle of a range after testing the bottoms of it, and there’s a wide spread of catalysts and indicators that folks are watching.

  • Last week’s FOMC minutes were probably the most closely-watched of the past six months. In 2023, market sentiment around rates certainly got ahead of themselves (and I was certainly guilty of this fallacy) with both rates curves as well as commentators assuming a sharp tightening cycle was imminent. Last week, the focus was in the other direction, but Powell’s language carefully avoided implying that there would be further hikes, which gave the market some relief.

  • Israel-Iran has shifted from a situation that was changing every hour to one that we will likely be paying attention to for some time. Within the US, the focus is less on the conflict than on how university students are reacting to it.

  • Outside of a few moves, BTC has actually fallen back into the habit of tracking equities since Mid-March. SPs traded at their all-time high at the start of April, but a combination of rates uncertainty as well as geopolitical tension took them into a 6% drawdown. Over the past two weeks, stocks recovered half of that drawdown, which in turn helped BTC to bounce off its $56k low.

And within crypto, the chief focus last week was on the ETF flows. In the beginning of the ETF product’s life, ETF flows were purely an Input for sentiment. No one was sure how strongly institutions would embrace the BTC ETF, so when the answer turned out to be “quite strongly”, it was a positive catalyst for crypto in general which pushed BTC to its ATHs. That period seems to be mostly over; funds that were going to buy the ETF have bought it, and while there will continue to be institutions that are still getting comfortable with the product, it seems like the initial capital is in. Now the ETF flows are shifting to be an Output: when sentiment is positive, we will see inflows, and when it is negative (as it was last week), we will see outflows. There is some lingering mentality that the flows are still Inputs, so on days where there are outflows, we typically see a selloff, but I suspect this mentality will fade, and folks will stop staring at the creation/redemption numbers so closely, as they simply become reflections of the market’s recent performance.

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