In this report:
- Macro & Liquidity Outlook for the Upcoming Quarters.
- Last Year's Catalysts Vs This Year's Catalysts.
- Potential Action to Take.
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.
Macro & liquidity outlook for the upcoming quarters
We have explained this in great detail in our most recent Market Update, so for this report, we'll keep it shorter and sweeter. But in this section we'll cover:- Reduction in the number of interest rate cuts in 2025.
- Trump tariffs and negotiations are leading to a strong dollar.
- Bessent's debt refinancing issues for 2025.
Reduction in the number of interest rate cuts in 2025
On the macro front, we've recently seen the data come in stronger, whilst inflation has remained sticky at a high of 2%, which is well above their 2.00% mandated target. This has resulted in a shift at the FED (from what we saw on December 18th), where Powell and the FED forward guided just 2 Interest Rate cuts in 2025, having previously expected 4.Since then (Dec 18th), the data has only kept coming in stronger, which has resulted in the market pricing in just 1 Interest Rate cut for 2025. And, after today's data (the strong labour market data), this single Interest Rate cut has been pushed out all the way to October 2025. So, in just a matter of a few weeks, we've gone from 4 interest rate cuts in 2025 to getting excited about now, maybe just 1.
This is a key change and something that changes our outlook. And again, it's happened very quickly. 4 Interest Rate cuts for 2025 were super bullish, but a reduction down to just 1 is far less bullish.
Trump policies
Alongside this, we have Trump coming into office, whose policies are tariffs and to be strong on immigration. Tariffs (alongside Interest Rate cuts being priced out by the market) have led to the DXY going higher in the last month, and this has been a headwind for risk assets.Trump has very positive market and Crypto policies. But these will likely take time to clarify and implement. Founders will then take time to raise capital, employ, etc. So this will all take time, likely quarters. But long-term, of course, it's bullish.
On a separate note, the Strategic Bitcoin Reserve. We see there as being a high chance of a 'Stockpile' being announced. But, outright buying, we're very sceptical.
Bessent's debt refinancing in 2025
We went into more detail in this in our most recent Market Update so we'll link that rather than just repeat ourselves here.Last year's catalysts (2024) Vs this year's Catalysts (2025)
Right, let's dumb this down into a simple and neat format.2024:
- Yellen boosted liquidity by issuing an increased amount of Bills against Coupons.
- Trump spoke positively about Crypto, and the market was excitingly watching his odds of winning the Presidency.
- A large amount of interest rate cuts were expected, and risk assets responded positively to this.
- Our coins were performing well, but there weren't any major T1 listings. So we were excited about that and what that could do.
- Positive crypto policy from the new administration? We're waiting on this, and either way, it'll take a lot of time to implement and feel its effects.
- ETFs are here, and they usually see increased flows in their second year.
- Strategic Bitcoin Reserve. The market is pricing this at low odds, although it wants outright buying, which we're very unlikely to get. A stockpile can happen, but the market likely wants more than that and, therefore, may be let down.
- Does growth in the US hold up?
Potential action to take
In the last few weeks, we've seen a big risk-off move, but it's mostly come at the furthest end of the risk curve - in Memes. We're yet to see a really sizeable pullback in the Majors (BTC and SOL). BTC is down 12%, which is very normal and fine for a bull market. SOL is down 28%, which is a lot more, but it is still normal in a bull.What we're potentially considering is that the furthest end of the risk curve (memes) has sold off first. And potentially, majors will come next. Now we're not expecting a new bear market, but we are potentially expecting a trickier period ahead of us. For BTC and SOL, we're open to the idea that they revisit the Yellow Boxes we have put in their charts. We would be strong bidders of these zones as we expect the second half of 2025 to be positive.
BTC: Potential zone: $73,900 to $80,300
ETH: Potential zone: $2,660 to $2,875
SOL:
Potential zone: $120 to $145
WIF:
Potential zone: $0.80 to $1.10
POPCAT:
Potential zone: $0.31 to $0.40
SPX:
Potential zone: $0.60 to $0.75
Now, we really stress these are very bold calls and well outside of the consensus. So they may not happen, but with the outlook we currently have, we should be open to the potential of this happening as we don't think the odds are as low as they might seem just off the cuff.
Cryptonary's take
Now, you really have to sit here and look at your overall exposure to the Crypto market and ask yourself how comfortable you are with the amount of capital you have in the market. With the outlook we have going forward, it might not be wise to be 100% fully exposed to the market.But if you wanted to trim some size and get some USDT on the sides, where do you do it? Well, memes are down substantially already, and as we noted, the assets at the furthest end of the risk curve seem to have sold off first and more dramatically. So they're potentially less attractive sells, even though their potential short-term downside targets are quite a lot lower %-wise. Majors, on the other hand, are still at relatively attractive prices, so these may be more attractive to trim down on to free up some USDT.
Ultimately, you have to ask yourself how comfortable you are with your current size in the market and, if we're right, how uncomfortable that might make you. You may also think on some plays it's not worth selling, and you're willing to ride through some downside if you're HODLer.
Lastly, we've put the above piece out to lay out what we think is a lot of really important points. To be clear, we don't think the cycle is over, however, we think there is a decent probability of some shaky months ahead of us. From here, it's up to you to make the decisions you're comfortable with that suit your specific style best (investor, holder, swing trader, etc).
Peace!
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