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This Week’s Setup: Crypto Decorrelating from TradFi?

Good afternoon all,

This week began with the market experiencing its largest Longs liquidation event in over 9 months, with major assets now pulling back to their key support levels. So far, however, prices have responded positively at these key zones.

This Week’s Macro Events:

We don’t have any major macro events this week (e.g., Fed meeting, inflation print, or labour market data), but we do have a plethora of Fed speak and mid-tier economic data releases that the market will still pay attention to.

This Week’s Macro Data:

Key data this week includes:

• Thursday: GDP
• Friday: Core PCE, Personal Income, and Personal Spending

We don’t expect any single data point to materially move the market. However, the outcomes will help refine our macro outlook:

• Weaker data supports the rate cut narrative
• Stronger data eases growth concerns but may reduce the likelihood of near-term cuts

In our view, this week's Fed speak is more likely to move markets than the economic data.

Fed Speak:

A wave of Federal Reserve speakers is scheduled this week, including Chair Powell on Tuesday. We expect most speakers to lean dovish—likely suggesting they’re open to more cuts to stay ahead of a weakening labour market.

The key difference between speakers may be in how many cuts they expect over the next 12 months. Most will likely avoid specifics. However, Miran is expected to be the most dovish of the group.

Markets could react negatively if a significant number of Fed members:

• Push back on an October cut
• Signal a slow and gradual cutting cycle instead of a front-loaded one

That said, the market is currently pricing in a 91.9% probability of an October rate cut—expecting dovish signals.

Crypto Decorrelating from TradFi:

In the last week, we've seen TradFi Indexes (S&P, Nasdaq and the Russell) all move higher to new all-time highs, whilst BTC hasn't - with price rejecting into $117k. But we did see Majors (ETH, SOL and HYPE) move back to the highs of their ranges, or new cycle highs. But we still haven't seen a diversification out and a risk-on move in the assets further down the risk curve.

Nasdaq Overlayed with BTC:

In the below chart, we can see the BTC chart overlaid on the Nasdaq. Nasdaq has continued higher, whilst BTC has moved lower, breaking the positive correlation.

Nasdaq Overlaid with BTC:

On the other hand, Gold has continued pushing higher, which suggests to us that BTC has another leg higher ahead of it as we know the correlation is that Gold runs, BTC stagnates, and then Gold consolidates and BTC runs.

This week, we'll pay close attention to monitoring these divergences. Could it be that BTC and Crypto is lagging as Gold takes the spotlight? Or could it be that Crypto is risk-off first ahead of Equities - which is something we've seen before.

Cryptonary's Take:

This week, we'll be closely monitoring price action as we head into the last week of September which is seasonally poor for Crypto. We're therefore looking for:

• BTC to hold the $110k-$112k support zone,
• TOTAL3 to find support between $1.05-$1.09tn.

Alongside this, we'll be paying close attention to the Fed speak and the incoming data for potential changes for the path of rates (and rate cuts) going forward.

It's still our base case that the economy is going to hold up, despite a slowing labour market, that the Fed then eases into. This environment has historically been very supportive for risk assets, and therefore we remain positioned in Majors and select memes.

We'll monitor this week, and should we see supportive Fed speak for the rate cut narrative, and coins are still at range lows, then we may look to add to high-conviction bets should prices still be at these range lows.