Playing the timeline: Positioning for BTC amid looming catalysts
What a time for Bitcoin! Major catalysts are right around the corner that could send BTC skyrocketing - ETF approvals, the halving, the whole shebang. But those flashing "buy" catalysts are complicated by a wrinkle: the looming possibility of a market crisis.
Do you load up on BTC to front-run the fireworks or keep cash on the sidelines, ready to scoop up the panic? It's a high-stakes game of timing; this time, it’s not only about the charts.
TLDR
● Powell signals Fed to remain restrictive, 25bps hike possible in Dec
● Stocks and bonds sell-off post-Powell interview, 10Y yield tops 5%
● Bullish BTC catalysts ahead - ETF approvals, 2024 halving
● Key is timing BTC exposure for catalysts vs keeping powder dry for potential market panic
Powell To The Stand
In an interview with David Westin, Fed Chair J Powell acknowledged unexpectedly strong economic data, suggesting a shift to a higher rate environment. Despite nearing a year since the last 75 bps rate hike in Nov 2022, Powell noted the time lag effect.
Internally debating the restrictiveness of current rates, Powell hinted at difficulty determining their extent due to prior rate hike lags. Ending on a slightly dovish note, he emphasized caution about geopolitical issues and hinted at a weakening labor market.
A key quote highlighted uncertainty about entering a more inflationary period due to rising oil prices and increased seasonal spending.
The Fed's approach involves maintaining restrictiveness, with a potential for another rate hike. The November meeting is 'live,' leaving room for a rate increase. However, a December 25 bps rate hike becomes plausible if incoming data shows continued strength, contingent on bond yields. Bond market pricing and how it spills into Bitcoin
Post-Powell's interview with Westin, Equities ($SPX) and Bonds sold off. US 10-Y Bond hits 5.00%, the first time since 2007 (4.992% at writing).
Traditional logic expects crypto to follow suit, given $SPX movement. Surprisingly, BTC stands strong, up 1.1%, with alts like SOL rising 7%. While many alts dip, major ones hold steady.
Long-term outlook: Fed and markets may tighten if strong data persists. Fed aims to curb inflation at 2.00%, currently at 3.7%, potentially impacting crypto negatively.
Cryptonary’s take
Here’s how to play Bitcoin here.
With all the above being said, we need to consider that if we’re solely in cash, we’re now not just playing against price, but we’re playing against the timeline, matched against the events. For instance, if we expect growth in the US to slow significantly next year, and we’re waiting for something to break that drives markets lower, and we then buy panic/dip - we may not get the lows we want.
Suppose a recession or a breakage in the economy or financial markets drives price lower at some point next year. We’d ideally like to be buyers of that.
However, if we have the Bitcoin ETFs likely to be approved in December/January, we then also have the halving in April 24; we really need to increase our exposure prior to these events if a market panic is not going to come before these events. That essentially means we’re judging to see if the recession does come, and whether it comes in time for us to buy into the markets before the ETF approvals and the halving. For us now, the above is the key battle and the battle we need to win.
You’re not just playing against price, but you’re playing the timeline and the events within it. We need to have relatively decent exposure before the bullish catalysts but also enough ammunition on the sides that we can buy up a panic in markets. This assumes that a market panic (caused by a recession or a breakage in the economy or markets) doesn’t precede the bullish catalysts for crypto. Over the coming months, we will explore the above concepts and alter our positioning based on the data and the timeline of events.