Since last update: BTC -16.7%, ETH -15.7%, stocks -7.3%, bonds -2.2%
1) The total crypto market has retraced more than half of its move off the lows in June, with positioning in BTC remaining generally anemic the whole time and ETH futures undergoing several cycles of crowding -> clearing as the merge (likely 11 days away) approaches.
Deeply characterized by the underperformance of BTC, the market-wide rally began to lose momentum at a similar level of ‘stretchedness’ as the previous two (November top and March bear market rally). The darling ETH dropped 13% in 24 hours and left a lot of hands burnt.
From there, the correction continued like many have this year due to broader financial conditions, which post-Jackson Hole are taking a rapid leg towards the tightest of the year. Notably the ETHBTC pair has held near the highs during this downturn (having an obvious catalyst).
2) Equity markets are now entering the weakest seasonal period of the year, for price and (logically) earnings revisions – so far for all the talk about a slowdown, the median S&P500 stock forward EPS has been revised down less than 1%.
As we’ve covered multiple times, equity market positioning has spent most of the year bifurcated by ‘fast money’ and ‘slow money.’ The largest owners of U.S. equities (households) have only continued to add to stocks this year.
But who do you think was really ramping spoos all of July? Price insensitive systematics, viciously short in June, are no longer modeled as skewed to the buy side. And an array of HF positioning indicators have ticked lighter *BUT remain well below long-run averages.
While on the topic of equity markets, we have continued to find BTC’s refusal to come significantly off of the lowest levels seen this year even with what has been an incredibly supportive backdrop here very much at odds with the idea that there is real demand at $20K.
Not to come across as outright bearish, we said at the time of the lows that funds blowing up is not something that happens far from bottoms and stand by that. We are simply not eager buyers of spot BTC today.
4) Following fever-pitch speculation seen in options after they materialized as a preferred way to trade the ETH merge, calls have cooled down with dollar values reset and a ceasefire on their rate of open. This is correlated to futures market positioning as well.
5) There is a long weekend ahead in the States, where it has become almost self-fulfilling from expectations that erratic price action (in both directions) is relatively common.