Yesterday I mentioned that some investors took profit off the table, in traditional markets, due to inflation data about to come out. It came out and it turns out it’s the highest in about three decades. The key metric jumped to 6.1%, which is very high, no matter how you look at it.
Essentially it’s a function of cash being worth less and/or prices rising and/or production and supply chains being constrained by countries shutting down in the past year or two.
That type of shift definitely weighs on risk assets. And, indeed, you can see equity indexes go down. I'm always talking about the Dow, S&P and Nasdaq but you’ll see the impact across the globe during Asian and European trading hours.
Now, let’s look at crypto. Long term, I actually think that inflation is actually supportive of Bitcoin, programmatically scarce and decentralised, but, in the short-term investors don’t think that way. When traders turn risk off, when markets go down and when people have to maybe fund leveraged positions in the futures and options market, they tend to sell what’s available and liquid -and that’s crypto among other things.
Right now, the broad crypto market has dropped about 4-5%. BTC is currently down at $64,500 and the rest of the crypto space followed. The only coins I see in the green on my watchlist are surprisingly WOO and LINK, the rest is deeply in the red with the worst performers being GRT, DYDX and CURV.
So, how do we play this? First, I don’t play, I hold that’s the only thing I do that’s always worked out for me so far. For traders, though, it might be worth taking some risk off the table with the idea that the current worries will still take some days, maybe weeks to play out. For less dynamic investors, if you were hesitating to buy BTC at 68K, you might find 64K or 60K or 55K more attractive levels, the opportunity of getting in you initially missed and is presenting itself.
Otherwise, on the news and data front, the positive shift crypto has enjoyed so far isn’t going away. ETH futures’ global open interest topped $13 billion, which is just massive; the BITO and BTF had their biggest volume days in two weeks (granted maybe to sell, but still); and just yesterday’s there are talks of Twitter setting up a crypto team to explore decentralised app. We’re not stopping here.
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