Thursday, Feb 29, 2024

BTC suspense, sticky PCE, crypto and sovereign debt

“The goal of forecasting is not to predict the future but to tell you what you need to know to take meaningful action in the present.” – Paul Saffo  ||

Hello everyone, and happy Four Year Cycle Day! February 29th has sort of magical feel to it, doesn’t it?

If you’ve missed the past couple of days, you’ll notice a change in the format – the usual intro and disclaimers are now at the bottom. Cleaner, no?

IN THIS NEWSLETTER:

• BTC suspense builds

• US PCE: strong consumption vs a slowdown in economic growth

• Bitcoin and the unsolvable debt problem

If you’re not a subscriber to the premium daily, I hope you’ll consider becoming one! You’ll get ~daily insight into the growing overlap between the crypto and macro landscapes, as well as some useful links, and access to an audio read of the content.

WHAT I’M WATCHING:

BTC suspense builds

After an exhilarating couple of days, we now seem to be settling into the “new normal” of BTC over $60,000, something that seemed far away just a month ago. Indeed, barring a sharp correction later today, BTC is set to record a February jump of over 40%, its steepest monthly increase since December 2020.

Of course, we could get that sharp correction, that is the way of crypto markets, but the rarefied air of new all-time highs is no longer so far out of reach.

(BTC year-to-date, via TradingView)

Let’s talk about that possible correction, though.

First of all, it would be good news.

A sharp climb without a pullback creates false expectations and stirs up retail FOMO and a leverage build-up, both of which usually end in tears. It’s too early in the cycle for a frothy market just yet. A regular reminder that crypto assets are volatile and very far from up-only tends to inject healthy doses of disappointment for “weak hands” and determination for longer-term players.

Second, any correction is likely to be seen as a buying opportunity by those worried that they had missed the run. A drop would soon find a robust floor as new investors take positions.

Meanwhile, leverage continues to climb, and it appears to be largely originating from US-based institutions, going by the increase in BTC futures open interest on the CME (well past its previous all-time high) vs that on Binance (almost there but not quite).