*|MC:SUBJECT|* | Good morning to all you tasty traders. Wherever you are, I hope you're having a wonderful summer.
This past week in both traditional and digital markets has been anything but boring.
At the time of writing... - Bitcoin (BTC): -4%
- Ethereum (ETH): -4.5%
- Solana (SOL): -10%
- The Crown Jewel of AI (NVDA): -9%
Quite to contrary to the summer doldrums we've come to expect at times. So what's on our minds at tastycrypto? | | - An end to America's War on Crypto
- Seasonality kicking in
- The positive relationship between bitcoin's price and volatility
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Bitcoin 2024
We came into the week on a high-note following the Bitcoin 2024 conference in Nashville. Bitcoin's price tagged the top of the massive range it's been in, nearing $70k, following speeches from pro-crypto politicians such as former President Trump, RFK Jr, and Senator Cynthia Lummis.
Topics driving bullish price action ranged from potentially creating a US bitcoin strategic reserve, to calls for the removal of SEC chairman Gary Gensler, and a shift in our current seemingly anti-crypto policy here in the U.S.
A shift towards pro-crypto policies! Just imagine.
Unfortunately the tastycryto team couldn't attend but we watched the livesteam on YouTube. If we were there, you know we would've been screaming at the top of our lungs.
Make crypto love, not war, my friends.
Speaking of YouTube, I have the pleasure of joining Nick Battista and Mike Butler on tastylive every Monday. This week we covered the conference highlights which you can watch in more detail below. | | |
Go away in August... Come back in October?
Markets are chaotic organisms, and in an effort to find clarity in the chaos, as traders, we seek narratives. We hang on every word from the FOMC's high priests and priestesses, we rigorously scan headlines, and in crypto, we analyze the on-chain movement of coins between addresses.
To an extent, these narratives are self-fulfilling at times. The pieces fit together and the puzzle is complete, if only for a moment.
One such narrative in markets is the concept of seasonality. This is the idea that prices fluctuate in predictable patterns at different points in the year.
When we apply this approach to crypto, and more specifically bitcoin, where we have a longer timeline of data, we're now entering into what has historically been a relatively weak period of performance.
From 2014 to 2023, bitcoin's performance during August and September has been flat to down on average, with negative returns occurring roughly two-thirds of the time.
That said, October could be a ripper! At least it has been before. Trade accordingly?
| | | BTC Performance: 2014 - 2023 | | | Often times on the tastycrypto show I'll comment on the perceived observation that bitcoin prices and volatility are seemingly correlated. Meaning, bitcoin is more volatile during periods of positive price performance compared to periods of negative price performance.
I.e., it's more volatile when it goes up and the magnitude of price movement is greater when returns are positive, specifically on a weekly and monthly basis. | | |
To test this view, I put together a research study which I discussed with Glen from the FX desk on the tastycryto show earlier in the week. As suspected, there's certainly a positive relationship between implied volatility, magnitude of returns, and the performance of bitcoin. To this point, bitcoin as an asset exhibits a beautiful asymmetry, and at times, keeping a close eye implied volatility can be helpful in predicting future price movement, given the positive correlation between IV and forward expected returns.
For details, check out the episode here and don’t forget to subscribe to our channel for more tastycrypto content each week.
| | | In closing, and in my opinion, we're likely to continue chopping inside the massive 50k-70k range in BTC, with no clear catalysts ahead of the election. | | | Maybe ETF flows surprise to the upside or ETH finds its narrative, but short-term, the macro environment is in the driver's seat for now and is signaling both economic growth and inflation slowing.
Typically not great for crypto's Head on a swivel. Watch tastylive at 4:30-5:00CT on M/W for more. | | |
Good luck out there,
Ryan | | | | | |
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