GMI Chart 1 – ISM vs. Bitcoin Implied ISM Pricing
Crypto, as an asset class, is still widely misunderstood.
The narrative that is now – and has been for some time – is that crypto is just a speculative asset that bears no real resemblance to the economy and therefore, unlike many other assets (equities, credit, fixed income, commodities, etc.) is not governed by the same economic fundamentals and is therefore difficult to assess within a traditional global macro framework. Of course, like most assumptions around crypto today, this is completely false.
Below you will find a chart of ISM (our preferred barometer for the︀ business cycle) versus what Bitcoin is currently discounting in terms of where we are in︁ the cycle. As you can tell, the two are very closely correlated and Bitcoin is︂ even leading as you would expect...
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GMI Chart 2 – Bitcoin YoY% vs. Global︃ M2 YoY%
The fact that Bitcoin has a lead over ISM is being driven by︄ the turn higher in the liquidity cycle, which bottomed last year and continues to rise︅ in year-on-year terms. This is why we have seen such a face-ripping rally in crypto︆ and tech stocks year-to-date: it’s all down to a turn higher in liquidity...
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GMI Chart 3 – Global Liquidity Cycle vs. GMI Lead Index
Our models for the global︇ liquidity cycle bottomed back in October of last year and continue to suggest an upward︈ trajectory well into 2024...
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GMI Chart 4 – Fed Net Liquidity vs. Ethereum
Recently, many have also been surprised by the push higher in Ethereum. Here again, it’s all︉ about the liquidity cycle and we expect Fed Net Liquidity to continue higher in 2024︊ as the Reserve Repo Facility drains to zero, which then prompts the Fed to resort︋ to the use of the balance sheet...
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GMI Chart 5 – Bitcoin (April 2014︌ - December 2026) vs. Ethereum Today
Additionally, if you’ve been following these GMI weeklies, you︍ will know that we’ve been calling for a breakout of the bull flag pattern in︎ Ethereum, which has been closely mirroring Bitcoin back in 2016...
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The GMI Big Picture️
Following last week’s negative surprise in October US CPI and PPI numbers, macro is back to scoring in the
Macro Spring regime within our framework. This is where we have spent the bulk of 2023 and is the preferred environment for long duration equity plays and liquidity sensitive assets like crypto, which is why tech stocks and crypto have been bar far your best bet in terms of asset allocation picks YTD...
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Another element that risk assets have been picking up on recently is that after a brief tightening in financial conditions over the summer months driven by a stronger dollar and higher commodity︀ prices, financial conditions have been easing since October despite the push higher in 10-Year Yields︁ to 5%.
Remember, financial conditions can ease with the same level of rates because you︂ need to think about everything in terms of cycles (i.e., the rate of change)...
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As we’ve been expecting, the Nasdaq has broken out from its bull flag chart pattern...︃
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... and we see the same when looking at Semis...
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It feels as︄ if Apple wants to retest the highs around 198; there is currently a DeMark Sequential︅ Countdown in play on day 5 of 13 higher...
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In addition, Amazon is very︆ close to a key breakout following the inverse head-and-shoulders bottom pattern that we’ve been flagging︇ for a couple of months now. A weekly close above 148 is the signal to︈ watch out for. We might not do it on this attempt and instead form another︉ right shoulder to complete a smaller inverse head-and-shoulders pattern before the big breakout. Something to︊ keep an eye on...
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Think Raoul covered it in simple terms in this.
