In Crypto Downturns, Bitcoin Holds Its GroundAlso Bitcoin Faces Macro Headwinds & US Consumer Sentiment Is In Free Fall
Welcome to Ecoinometrics' Friday edition. Each week, we analyze the three most critical market signals impacting Bitcoin and macro assets, delivering institutional-grade insights through data-driven charts and analysis. Today we'll cover:
Together, these charts paint a clear picture: Bitcoin is holding up better than most, but it’s not immune to the broader forces at play. As the NASDAQ stalls and consumer sentiment collapses, the macro environment remains a headwind. In this context, staying disciplined means watching the flows, reading the macro signals, and understanding where Bitcoin fits in the bigger picture. In case you missed it, here are the other topics we covered this week:
Essential Decision-Making Tools Bitcoin Market Monitor - Key Drivers in Five Charts:
Bitcoin Market Forecast - Probability Scenarios & Risk Metrics:
Get these professional-grade insights delivered to your inbox: In Crypto Downturns, Bitcoin Holds Its GroundCompared to your typical macro asset, Bitcoin delivers strong returns in bull markets. Take 2024 for example. Bitcoin was up 120%. Gold, which had similar risk-adjusted returns, was only up 27%. But if you zoom in on digital assets or Bitcoin-adjacent plays, Bitcoin isn’t always the top performer in terms of total return. Last year, DOGE gained 300%. Mining stock WULF returned 250%. So yes, in a bull market you can find better performers than Bitcoin. But those assets generally come with worse risk-adjusted returns, and more importantly, the capacity of those trades is limited, you can’t move large amounts of capital into them without disrupting the market. That’s one reason we usually don’t cover digital assets beyond the major ones. If you’re investing at scale, and you’re operating on macro timeframes, Bitcoin, Ethereum-sized assets, and equity categories tied to Bitcoin are where you want to be. But we’re not in a bull market anymore. Our market regime model suggests Bitcoin is shifting into a bearish phase. And when the outlook turns bearish, your choices narrow. If you still want exposure to crypto (excluding stablecoins), Bitcoin is the only realistic option. Yes, Bitcoin can drop sharply during downturns, but it still holds up better than other digital assets. The same is true on the equities side. Look at the Bitcoin miners in the chart below. Since December, when the Fed revised its forecast for rate cuts in 2025, miners have consistently underperformed. They’ve sold off harder than Bitcoin at every step. In this space, everything ends up being a leveraged play on the direction of BTC. That’s especially true for miners. Right now, that means one thing: you’re better off consolidating into Bitcoin than trying to get cute elsewhere. The further you go from Bitcoin in the crypto ecosystem, the less resilient the asset becomes when the tide turns. That matters if you’re optimizing for capital preservation in a downturn.
Bitcoin Faces Macro HeadwindsRight now, markets are reacting to headline risk, mostly around the trade war the US is tangled in. What President Trump says or does, how the EU and China react, it all moves the stock market. And that, in turn, nudges Bitcoin. But forget the short-term noise for a second and zoom out. If you look at the year-on-year returns of the NASDAQ 100, a clear trend emerges. The mean reversion risk we pointed out earlier this year is fully in motion. The NASDAQ is now flat year-on-year, well below its long-term average. Historically, that’s bad news for Bitcoin. When the NASDAQ underperforms, Bitcoin tends to lag too. Returns are lower. Corrections are deeper. Momentum dries up. Some have started talking about a decoupling, the idea that Bitcoin might break free from traditional risk assets and chart its own path. But as we discussed on Monday, that conclusion is premature. A few days of divergence isn’t enough to declare a structural shift. And we’re not seeing signs of structural decoupling on the flow side either. ETF flows are still negative on a 30-day rolling basis. That’s not what bullish decoupling looks like. Even if the trade war were to stabilize, the stock market likely won’t recover without a Fed pivot or a sharp improvement in macro sentiment. Without that, equities will stay stuck below trend. And if equities are stuck, Bitcoin’s upside is capped. Bitcoin’s bull cycles have never existed in a vacuum. When liquidity dries up and growth assets stall, Bitcoin slows too. If you’re waiting for the next leg up, keep one eye on the NASDAQ.
US Consumer Sentiment Is In Free FallSpeaking of uncertainty in the US economy, it’s not just investors who are confused about what’s going on. The University of Michigan’s Consumer Sentiment Index measures how US households feel about their current financial situation and the economic outlook. It captures expectations for inflation, interest rates, personal finances, and broader economic conditions, all of which influence consumer spending behaviour. Since the start of the year, the index has been in free fall. If you look at the chart, sentiment is now dropping back to where it was in 2022, when inflation was running hot in the US. That also happens to be the same level we saw during the Great Recession. In other words, high inflation, or even just the fear of it, can drag down consumer sentiment as much as a full-blown recession. Now, that doesn’t mean consumers are about to stop spending. In fact, they haven’t stopped at all since 2022, and that persistent demand is part of why inflation still isn’t back to pre-COVID levels. But this sharp drop in sentiment adds another layer of uncertainty to an already fragile macro backdrop. And in a consumer-driven economy, collapsing sentiment can signal trouble ahead: weaker demand, slower growth, pressure on corporate earnings, and ultimately downside for equities. That matters for Bitcoin because in risk-off environments, correlations kick in. If the stock market sells off, Bitcoin usually doesn’t rally, it gets dragged down with everything else.
That's it for today. Thanks for reading. Cheers, Nick P.S. Every week, our team conducts extensive research analyzing market data, tracking emerging trends, and creating professional-grade charts and analysis. Our mission: Deliver actionable macro and Bitcoin insights that help institutional investors and financial advisors make better-informed decisions. Ready for institutional-grade research that puts you ahead of the market? Click below to access our premium insights. You're currently a free subscriber to Ecoinometrics. For the full experience, upgrade your subscription.
|
Friday, April 11, 2025
In Crypto Downturns, Bitcoin Holds Its Ground
Subscribe to:
Post Comments (Atom)
Popular Posts
-
New Updates From Safe, Gravity and More. Presented by Today's News Recap Suit Settled - Galaxy Digital settles $200M lawsui...
-
gm Bankless Nation, It's the big question on everyone's minds: how will ETH ETFs impact ETH price? ...
-
Understanding Sei: A Comprehensive Overview, Nominate A Mainnet Speaker and more Network Fundamentals are here! Designed to enhance your a...
-
Dinocoins like XRP and ADA are mooning ...
-
The top of investing bubbles, so obvious in hindsight, are notoriously impossible to time ...
No comments:
Post a Comment