This is a free preview of MTC 31… In this note:
Why it looks like crypto has peaked and will make new cycle lows in September.
The run-up trade.
The philosophical and market importance of the Tornado Cash sanctions.
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Today’s note is 2800 words (12 minute read)
Algorithmic Layering: Sanctioned
Since the last MTC, a lot has changed.
I have been calling for a bottoming process since the end of June with stability, a bullish bias, and a BTC range of 20000/25000. That’s how the last six weeks have played out. Now, we topped out at exactly 25000 and I think we are entering another bearish phase for crypto as Merge enthusiasm fizzles early and macro headwinds return.
New cycle lows coming for crypto in September.
The 2000 top in ETH and the 25000 top in BTC look like mini cycle highs. Now the USD is ripping, MSTR is finding gravity after briefly leaving the atmosphere, and everything looks wobbly.
The sanctioning of Tornado Cash has offset the positive Merge ETH vibes. Is everyone still 100% confident that 1ETH = 1ETH?
The EU and UK energy crisis are pushing the USD higher and risky assets lower.
The SPX bear market rally peaked exactly where it should have after a perfect touch of the 200-day moving average.
Powell’s speech at Jackson Hole this Friday has the market hunkering down and nervous about a recommitment to the hawkish message after a somewhat dovish-sounding July meeting and minutes.
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Even with The Merge as a major idiosyncratic crypto story and the Tornado Cash story pushing the other way, crypto’s anchor is still exogenous: the performance of risky assets and the USD still determines the primary path. Here’s a chart:
ETH vs. DXY (inverted) and NASDAQ futures
The unstable codependent relationship between TradFi and crypto continues. Crypto is the anti-dollar and the USD is ripping higher. No amount of Merge frontrunning can maintain positive ETH momentum while 55-knot macro headwinds prevail.
I expect the market to continue to buy USD into Friday’s Jackson Hole speech from Jerome Hayden “Jay” Powell. This USD strength is what I call “the run-up trade”. Here is a description of the run-up trade from Alpha Trader…
This has been a free preview of the latest MTC. The rest of the note covers the run-up trade in the USD (and its implications for crypto + the philosophical and market implications of the Tornado Cash sanctions + the disappearance of crypto TV ads (for now)…
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bd