Managing Expectations
Week of April 24th, 2022
On-Chain Commentary
Bitcoin volatility continues to contract as choppy price action persists. Historically, an extended period of contracting volatility has led to an explosive expansion in volatility. The 30-day rolling volatility is nearing levels not seen since October 2020, prior to the multi-month bullish rally. Unlike October 2020, price continues to hold below the 20-week moving average (MA) at $41,700, suggestive of a bearish resolution in this case. Price bias will remain bearish until breaking above this key MA, which has acted as a sentiment litmus test over the past 10 years. Furthermore, since 2014, all bear market lows have found support at the 200-week moving average, which has continued to climb in recent months and now sits at $21,700.
On-chain evidence continues to show a rapid decline in Bitcoin held on exchanges, now matching levels seen in August 2018. Additionally, over 64% of Bitcoin’s supply has not moved in the past year, marking a new all-time high for this metric. Collectively, this suggests entities and individuals have continued to hold through the drawdown since the price all-time high in November, and are potentially moving more and more coins to longer-term storage or other yield-generating avenues. In November 2018, during a similar price volatility squeeze which had a bearish resolution, coins held on exchanges were increasing, not decreasing as they are today.
Macro Commentary
Interest rate worries dominated market sentiment last week as comments from Fed officials caused investors to accommodate a higher rate environment than anticipated. A 50 basis point hike is all but certain during next month’s FOMC meeting, with the probability of a 75 basis point hike gaining traction for the June meeting. Strategists are starting to see more hawkish sentiment presented during planned speaking engagements by Fed officials. Fed fund futures markets are now showing a 3% level by early 2023. For reference, the most recent Fed funds rate high of 2.5% was reached winter 2018-19, with a previous higher high of 5.25% from 2006 to 2008.
The S&P 500 index notably trended lower starting Thursday morning, from the high of the week at 4500 down to about 4250. Year-to-date lows seen early March are just below 4200 level, down about 11.5% for the year. The 10-year treasury yield held steady in the 2.85-3.00% range last week, trending lower through Monday’s trading day. Brent oil futures are about unchanged for the month at the $105 level, with a recent low below $100 Monday. Prices were held lower as Covid-related lockdowns in China were spreading, affecting demand in the near term
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The Portfolio Management Team
Steven McClurg, CIO
Bill Cannon, Portfolio Manager
Wes Cowan, Portfolio Manager, Head of Defi
Josh Olszewicz, Head of Research
Sean Rooney, VP Research and Trading
Will McDonough, Vice Chairman, Investment Committee
Leah Wald, CEO, Investment Committee
Shannon Smith, Head of Investor Relations
