Crypto in search of catalysts for the next leg up

Looking ahead, the crypto markets seem to be searching for their next catalyst for the next leg up. A concentrated barbell strategy focusing on major cryptocurrencies and resilient meme coins could offer an optimal approach in this uncertain environment. 

Broader diversification may be premature, but patience and positioning in clear winners could pay off as the macro landscape continues to evolve.

Let's see what we get.

TLDR

• This week's inflation data release could positively impact markets if it comes in softer than expected.
• Risk assets remain vulnerable to shifting macroeconomic winds and central bank rhetoric.
• In Q3, we can expect potential tailwinds from ETF advertising, election liquidity, and post-halving supply squeeze.
• The recommended strategy remains a concentrated barbell in major cryptos and resilient meme coins.

Disclaimer: This is not financial or investment advice. You are responsible for any capital-related decisions you make, and only you are accountable for the results. 

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Key data this week 

Over the last few years, the key data the markets have focused on has been the inflation data. We'll receive April's figures this Wednesday. 

Overall, the data is expected to come in 'softer' than the prior months, which have been 'hotter' (higher figuratively) than expected. Suppose this week's data comes in lower and potentially even lower than the consensus/expectations. In that case, this will be a welcome sign to the Fed and will likely be taken positively by markets. 

Core Inflation MoM (Month-on-Month) is expected to be 0.3%, less than the 0.4% we saw at the last print. If we see 0.2%, that would be massively positive for risk assets. The YoY (Year-on-Year) figure is expected to be 3.6%, again well below last month's reading of 3.8%. 

If the data comes in at the current consensus, markets will likely react positively. 

The market is vulnerable to macro 

Towards the end of last week, we really saw how macro data is whipsawing risk assets. 

On Thursday, the Bank of England indicated they would cut rates relatively soon. This sent the Dollar Index ($DXY) up, which is bearish for risk assets. However, just an hour later, Initial Jobless Claims in the US came in at 231k, well above the 210k it had been previously averaging. This indicated a slight weakening (or moderating) in the labour market, which would give the Fed more room to cut interest rates. 

During this series of moves, we saw $DXY and bond yields initially go higher, resulting in lower-risk assets. Then, following the Initial Jobless Claims data, we saw all reverse—based on the likelihood that the Fed can now possibly cut interest rates. 

Crypto seems to be searching for the next catalyst to drive the whole space higher (prices-wise). The halving, in our opinion, has never been an immediate catalyst. It is, but never straightaway. It always seems to take 3-6 months for the real supply squeeze to kick in. 

BTC

We remain in the flag and range-bound with prices—as we've predicted—for ages. Zooming in, $BTC is now again testing the horizontal level of $63,300, which we've seen is a key level for price to either be above (and be bullish) or below (and be bearish). A positive Daily close above this level would be great and potentially open the door for BTC to break out of its bull flag pattern. 

Lastly, the period post-BTC-halving is usually very boring and can shake participants out. Don't let it shake you out.

Survive it. Keep your positions concentrated for now, and we'll diversify (risk-on) if/once $BTC breaks out. This may take more time. 

Cryptonary's take

What are the expectations and strategy from here?

In Q3, we'll likely see ETF hosts advertise their ETFs to customers more, and we could get another drive from there as more market participants get access to buying them. Alongside this, liquidity may improve going into the election, and the BTC halving may begin taking effect in terms of its supply squeeze. 

So, in theory, we think we'll continue to be range-bound, and ALTS and weaker memes may struggle (for the next month or two until we start getting into August). However, we think Majors (BTC, ETH, and SOL, although more BTC and SOL) will still perform well. We also see the major memes holding up the best ($WIF, $POPCAT, etc.). 

Therefore, we continue with the barbell strategy—majors and memes—but concentrated. There are clear winners, so we don't necessarily see large portfolio diversification as optimal. Once we move into Q3, we believe that'll be the time to start diversifying into more memes and altcoins. 

Patience until then.

Cryptonary, out!