My overview of the current decline in global growth and some indices I use to track macro risk off-on sentiment for BTC and crypto 💰💰
A thread 🧵🧵👇
1/ I have been vocally risk-off when looking at global markets thus far in 2022. ⚠️
We are slowly approaching a macro market bottom.
Before we can resume the long-term upwards trajectory, we first need to identify some key metrics to help us time entries. 🧠
2/ Relative movement of Lumber/Gold provides important information on economic growth + inflation expectations. 💡
Lumber’s sensitivity to housing (business cycle), makes it a unique commodity as it pertains to macro fundamentals and risk-seeking behaviour.
3/ Conversely, Gold historically exhibits safe-haven properties during periods of heightened volatility and stock market stress. 💡
The relationship between LBS and XAU helps to decide when to play defence/offence within the context of active portfolio management.
4/ This strategy results in stronger risk-adjusted returns than a passive buy-and-hold approach. 📈
Risk-on during periods when LBS is leading XAU. 🤑
Risk-off during periods when XAU is leading LBS.
At present we can expect XAU outperformance till early Q1 2023.
5/ Building on the above, I also look at the Chicago PMI data to gauge where we are in the wider business cycle.
We have been falling on this metric since late 2021 - @Trader_XO regularly views this on his livestreams.
A bottom here is a good gauge for risk-on + BTC strength.
6/ I also pointed out how the ratio of global exports to output is falling in my article describing why I felt we have not seen a bottom in markets -
This shows a decline in globalisation and slowdown in growth as we transition to a deflationary era. 📉
7/ Lastly, I like to view the BDI (Baltic Dry Index) which tracks the price of moving major raw materials by sea. It also acts as a proxy for growth and globalisation. 💡
This has been falling since late 2021 and looks to fall further before bottoming early 2023 with BTC.💰
8/ All of this data should be used in conjunction with a fed pivot and viewed through the lens of liquidity conditions in the US which have been poor in 2022 through QT.💡
Fed rate is currently 3.25%
IMO next hikes will be 0.75+0.50+0.25 to achieve the 4.75% target by Feb 2023.
9/ Feb 2023 is in-line with my Q1 2023 target that I have held since early this year for a Fed pivot.
A pivot means we are close (in time) to a bottom, but not in price. It is simply an early warning to allocate to BTC
10/ In this article I also gave some exogenous reasons for a potential bottom forming in the coming months with some game theory from a friend of mine @fejau_inc
this twitter thread.