The Silver Linings Trade Book
Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
This week’s CPI print brought with it something we haven’t yet seen much of this year – optimism. Markets have extended gains this week, with US inflation figures coming in at 8.5% on Wednesday – 0.2% below forecasts and unchanged MoM. The latest data suggests that, if nothing else, the Fed’s staunchly hawkish tightening policy may finally be yielding results. While it’s safe to say an inflation rate of 8.5% is not something to be celebrated, both equities and crypto have run with the shift in sentiment, with BTC climbing back above the $24k level that has defined the upper bounds of trading activity since June.
Dominance
Surprisingly, at first glance, BTC dominance continues to move flat an inch above 40%. The space’s leading stablecoins, USDT and USDC, have seen reduced dominance as market participants continue to deploy sidelined capital. Most interesting, however, is Ethereum’s rampant gains since June. The Merge was successfully completed on the Goerli testnet on Wednesday, dialling up excitement ahead of the mainnet deployment slated for September. The velocity of ETH’s bounce from June’s sub-$900 lows has caught many off guard, with the second largest crypto having rebounded in excess of 100% to test $1900 resistance at the time of writing.
Forward Focus
The rapid cross-sector gains recorded this week evidence a macroeconomic climate hungry for hope. In line with the easily malleable sentiment witnessed throughout the current bear market, many investors have now pivoted from viewing their positions as swing trades to generational bottoms, with news outlets even claiming that the Nasdaq’s renewed vigour signals the entrance of a fresh bull market. Meanwhile, both equities and crypto remain orders of magnitude below their ATH’s, and a global energy crisis continues to increase in urgency. It’s worth noting that US inflationary pressures have eased largely due to the US dipping into its (finite) Strategic Petroleum Reserve in order to buck swelling oil prices.
Across the pond, European nations continue to battle energy prices surging to record levels, with several nations warning that blackouts and exorbitant electricity costs may be on the cards for 2023.
The current run represents a rare opportunity to secure significant gains in what has been an objectively hostile trading climate. Though the veracity and extent of the present move remains questionable, a flat CPI could motivate the Fed to announce a softer-than-expected rate hike this month, which would undoubtedly give investors further opportunities for continued upward momentum. Level by level, now comes the hard task of reading between the polarised shouts for zero and ATH’s. Even if inflation has peaked in the US, many metrics remain foreboding, especially regarding the entrenchment of the current energy crisis into our daily lives on a global scale. So we forge on, one week at a time, trying to divine sense during frankly unprecedented times. Given how arduous the situation remains for most, it’s worth reflecting on the fact that if you still have capital preserved and protected, you’re likely on your way to a winning portfolio.
Do we risk fading Burry again, anon?
