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All things considered, bitcoin and ether have weathered a significant macro storm. We discuss the moves that have occurred since the high in November, and its resilience since.
- Concerns over a growth slowdown were partially validated last week as the first-print of US Q1 GDP came in at -1.4% versus 1% expected; however, bitcoin again outperformed the Nasdaq in a volatile week
- Markets look to Wednesday’s Fed meeting for a “sell the rumor, buy the news” event similar to what occurred in January and March: bitcoin and ether rallied an average 18.5% and 28.5% in the two weeks following
- The Crypto Fear & Greed Index remains in “extreme fear”, an attractive opportunity for long-term investors
- Long-term holders are unfazed by market volatility with supply held reaching all-time-highs
THE BIRD'S EYE VIEW
Market volatility continued through month-end as concerns over a potential slowdown in US growth were somewhat validated with a -1.4% first estimate of Q1 GDP. Digital assets, which have had rising correlations to equities, whipsawed along for the ride with a rally on Thursday but a decline on Friday. This was a tough end for a tough April:
But for the second time in two weeks bitcoin outperformed the Nasdaq in a down market. And on a YTD basis, bitcoin has also outperformed (-17.3% vs. -21.0%). While equities rolled over into new yearly lows on Friday the 29th, bitcoin and ether remain 9% and 18.9% higher than late January (pg 3).
So bitcoin and ether have held up well despite an incredibly tough environment. When considering that the bear market began now six months ago with a peak on November 9th, meaningful moves have occurred over the macro landscape:
- 2yr Treasury Yield +2.30% from 0.42% to 2.72%
- 10yr Treasury Yield +1.50% from 1.43% to 2.93%
- YC inversion at the end of March
- Nasdaq Composite -22.1%, worst start of year since 1970
- Russell 2000 -22.8%
- Barclay’s Agg -10.1%
- DXY Index +9.6%, highest since December 2002
Even so, this macro volatility has not stopped bitcoin and ether from becoming part of the conversation for asset allocation decisions. While broader price volatility has remained, global adoption has continued, lightning network has made bitcoin a soon to be medium of exchange, investors have received more accessibility and greater regulatory clarity, long-term holding trends have strengthened, and ETH’s merge becomes ever closer to fruition. There is a lot to be excited about when it comes to crypto.
So when all is said and done and markets sort themselves out (and hopefully soon), this weathering of the storm will prove to hesitant investors that digital assets are viable in long-term portfolios and attractive substitutes for existing allocations in equities and fixed income.
As price near term has remained hostage to correlations and market headlines, we believe this is for now small symptoms of growing investor popularity rather than a longer-term trend.
Interestingly, the market rallied after the first two FOMC meetings of this year, with a “sell the rumor, buy the news” event occurring as digital assets lead the charge. We’ll see if this meeting can serve as a catalyst for near-term upside, similar to what occurred in both the January and March FOMC meetings:
On page two, we discuss the Crypto Fear & Greed Index, as well as comment on long-term holder supply reaching new all-time- highs.
OPPORTUNITY IN EXTREME FEAR
Like the traditional Fear & Greed Index, the Crypto Fear & Greed Index provides investors with an understanding of current market sentiment, often used as a contrarian indicator for long-term investors.
The Crypto Fear & Greed Index is a multifactorial index built by alternative.me, and considers volatility (25%), momentum/volume (25%), social posts (15%), bitcoin dominance (10%), surveys (15%), and search trends (10%).
Currently, the crypto fear index is in “Extreme Fear” with a reading of 22 at Sunday’s close.
When color-coding bitcoin’s price by Crypto Fear & Greed Index, we see that these periods have historically been attractive for long-term position building.
LONG TERM HOLDERS ACCUMULATE
Those holding bitcoin long term – as defined by Glassnode as bitcoin that has been held for longer than 155 days, have been unfazed by market volatility.
In fact, these numbers have reached all-time-highs of 13,549,822. The number has increased by 213,115 btc, since the beginning of this year, or $8.2 billion USD (in a down market) as of Sunday’s close.
So through broader macro volatility, and generally negative market sentiment and price action, long-term holders are uninterested in selling or even moving their bitcoin.
Over time, the number of bitcoin held long term has risen – this illustrates greater accumulation, longer holding periods, and increased scarcity.
Click here for the full PDF. As always, please reach out with any questions or comments.
Joseph Orsini, CFA
Director of Research
Key Market Data