ARE YOU STILL ALIVE?
For those soldiers left standing amongst the smoke and bodies, you will see the tide has shifted. We stand at the precipice of βits all overβ. Your brothers in bulla have defected to their new bearish allegiance, there is nobody left to fight for the green flag and the ephemeral βbidβ is now an infinite supply.
carnage on the battlefield
Surely it couldn't have been that easy, September is always red - so just sell. But despite how bad things look, bitcoin held up surprisingly well. NFP print was perfect goldilocks, US economy looks beaten but a soft landing is still possible. The R word might be long term bullish, but its the pavlovian boomer bell triggering "sell" as a reflex to their market PTSD.
This week I expect whispers to echo in the hallways of the market, as multiple fed officials start suggesting that rates need to come down. In the meantime we see @CryptoHayes has capitulated his short; and with it an optimistic promise fills the air as a few brave soldiers emerge with fresh fiat to continue the fight.
The fight was fierce but there is hope.
Macro
This week is inflation week, as the test results come out for economic performance around the world. If last week was the practice exam, this week we do it for real - and next week we get our remediation plan for all the bad central bankers:
China is expected to release its Consumer Price Index (CPI) and Producer Price Index (PPI) data. China is a dark horse, their economic recovery means that the US will have to play fast catch up. Sleepy Joe cant let AMERICA lose to the commies in their own game.
US data includes the Consumer Price Index (CPI). Expectations lean towards a moderate increase, but keep a close eye on core inflation excluding food and energy, this is the one the fed bros use for rate decisions. The Producer Price Index (PPI) and the Monthly Budget Statement are also on the docket, most of your degens will be too distracted by the main card - but this is the side event that drives direction.
European Central Bank (ECB) interest rate decision is a straight forward cut, while eurozone economics continue to remain irrelevant unless they importing arms or dumping BTC.
UK also has some GDP figures, but honestly this is a waste of time. Long term GBP = 1 USD anyway so whos gives a fuck.
Something we need to be careful of, βFed speak blackoutβ - if one of these gets announced. Expect a full blown casino mode, exit all markets unless you can tolerate face melting vol as the market spins into a speculative chop frenzy.
Liquidity Alpha
βECONOMICS:USCBBS-FRED:RRPONTSYD-FRED:WTREGENβ go ahead and bookmark this in trading view.
bitcoin is a liquidity bellwether
This is the secret sauce. If you want to learn more read from the liquidity wizard here - cryptohayes.substack.com. What I will focus on is rates and liquidity for the week.
The odds of a 500bps cut are pretty much off the table, during peak volatility we saw it on a coinflip, but now that the dust has settled. We are back to the 70/30 as it has been since late August.
If we only cut 25bps - were does this leave us? It leaves wiggle room for policy makers. Long term, we are entering a easing monetary policy, the goal is to return to normal and end QT with a lower baseline.
First step, ease up on rates. Then start digging around for interim tools in the fed toolbox, lets look how that usually plays out.
Step 1 is the cut, economy starts showing signs of weakness due to monetary policy tightening. And like a crack addict fresh out of rehab. Its never enough - so despite the dot plot suggesting cuts into 2026, the reality is cuts happen much faster and rapidly as things deteriorate. We could be right back down to zero. And before you know it - BRRRRRRR.
I suspect that QT stops just before RRP is depleted. The only driving force for RRP inflow has been rate uncertainty - as we get policy clarification this draws down, and then I expect a shift in balance sheet tapering to follow shortly after.
Crypto twitter sentiment
Its bad out there - apocalyptic levels of fear according to this super scientific indicator - still sure its completely made up.
The weekend PA has helped lift the markets a little, but there is disbelief about whether this is a real recovery - things donβt just miraculously turn around on low volume weekend spot moves, and making matters worse bybit OI cranking up - but i guess the weekend forecasters ignored this one.
Until we have clear shift in policy, I expect nothing more than mean reversion and copium threads - https://x.com/i_am_jackis/status/1832409613867659545 (i agree with this long term, but we cant just rely on tea leaves and chart patterns)
Price drives narrative
We had the ETF pump, bitcoin outperforming SP500. We correlation reverted back to SP500 slowly until the blitzkrieg of July when Germany started dumping coins relentlessly.
Then we had silk road coins moving to βcustodyβ further putting pressure on BTC. And we now stand on the other end of the spectrum - underperforming equities.
The overhead of bearish sentiment is strong. BTC beta continues to drive us lower as equities find new valuations. And until we get new policy direction, we are a ball underwater.
In the meantime technical trends have shifted to long timeframe bearish, with shorter timeframes reflecting small relief.
Daily to 4hr trends are signalling bearish, so I would personally like to reduce leverage in my portfolio and consolidate positions for better trending markets.
Funding rates are short term negative, but I expect these to normalize as the weekend rolls off - we hardly see sustained periods of negative funding as degens chase higher prices.
We still see that there are clusters of leverage still in the market for both directions as we settle in no mans land.
On the long side, bulls have to push hard to grab these positions with the only material liquidity existing at 57k. Which probably happens with a trend shift anyway, and we have continuation that follows from there.
Look at the orderbook and standing bids, short term its air above us, the liquidity maps suggest more down expectation and a possible retest of 52k to fill those bids.
Options Market
Max pain is up, but the only interesting strikes we see are the EOM strikes which are pinned at 57k similar to our liquidation map,
Short term expiries aren't too interesting, longer dated expires still have a high relative gamma between 53-57k so any price moves between this range Iβd expect to move pretty quickly, especially with the size of expirations pegged here.
If I was to guess, we probably stay pinned between 52 and 56k with 54k acting as the pivot point.
57k looks the most interesting from a liquidity and trend perspective for a reversal pivot point.
Hyper1ons thoughts
Iβd like to remain honest with you here. Last week I was somewhat bullish on a fast reversal - thesis was NFP comes in with signs of weakness, but still a chance to fix it, market looks bullish and we close the week above 60k.
That previous 56k bid is probably short term resistance, I have reduced portfolio leverage - long term those bids arent the worst, but I caved to the aggressive PA for survival. Im interested in bidding a 52k retest, but for the more risk adverse trader, look for policy direction change - free money is on the way.
Sub 50k, and I just close my eyes and long sleep. We dont want to return to goblin town.