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What is Macro/Crypto Summer? Don’t Miss Out, Says Expert

In a thread on X (formerly Twitter), Raoul Pal, a renowned trading guru and the founder/CEO of Global Macro Investor and Real Vision, has illuminated the crypto community about the advent of what he terms as the “Macro/Crypto Summer.” This period, according to Pal, is not just a fleeting season but a significant phase in the financial and cryptocurrency markets, deeply rooted in the cyclical nature of the global economy.

Why The Macro/Crypto Summer Matters

Pal elaborates on the concept of the “Macro Summer,” explaining it as a pivotal phase in “The Everything Code” cycle, closely following the Financial Conditions Index, which historically precedes the cycle by approximately ten months. The ISM (Institute for Supply Management) index, a key indicator of economic health, often bottoms out during this period, marking the start of GDP growth.

Pal’s thesis draws attention to the “near-perfect 3 1/2 year cyclicality” in the ISM business cycle, propelled by liquidity dynamics and the debt refinancing cycle at its core. He underscores the significance of liquidity: “And that is driven by liquidity, which bottomed at the end of 2022… macro summer and fall are all about liquidity rising and is a core part of The Everything Code thesis.”

Macro crypto summer

This influx of liquidity is crucial for tech stocks, which historically thrive during these phases. Yet, it’s Bitcoin and, more broadly, the cryptocurrency market that exhibit the most dramatic responses. Pal presents staggering growth figures from past Macro Summer and Fall seasons to underscore his point:

  • Bitcoin: Saw increases of “2012/2013: +146x, 2016/2017: +30x, 2020/2021: +8x…”
  • Ethereum: As an altcoin during the 2016/2017 and 2020/2021 cycles, it achieved “2016/2017: +1,770x, 2020/2021: +41x.”
  • Altcoins (excluding ETH): Witnessed an aggregate market cap rise of “+24x” in the last cycle.

Bitcoin summer

“Wild! When we just look at Altcoins ex-ETH (we only have shorter data for the last cycle), the entire market cap rose +24x! And that includes thousands of worthless tokens that didn’t rise, so I’m not just cherry-picking winners here,” Pal remarked.

Altcoin summer

DOGE, a popular meme coin, is mentioned by the expert as another prime example of the “power of Crypto Summer and Fall,” with its value experiencing significant multipliers – “2016/2017: +136x, 2020/2021: +370x” – in the aforementioned cycles.

These figures underline the significant influence of macroeconomic cycles on crypto valuations, with Pal pointing out the alignment of these cycles with Bitcoin’s halving events. “Crypto summer has started and fully develops post-halving,” he states, highlighting the interconnectedness of these cycles with the broader financial landscape.

Notably, Pal’s analysis doesn’t stop at the past; it looks forward, suggesting that liquidity is expected to rise all the way into the end of 2025. This anticipation is rooted in a complex interplay of global financial mechanisms, including the potential for increased US money printing in response to a massive ramp-up in interest payments and changes in Fed Net Liquidity and the Treasury General Account (TGA).

“Will the US join the summer party? […] I know it seems impossible now, but the US is on the verge of a massive ramp-up in interest payments. […] at some point – the balance sheet will stop shrinking, which is enough to unleash liquidity into the system. […] I cannot see how they don’t massively expand liquidity, one way or another.

Meanwhile, Pal predicts that it won’t be just the US injecting liquidity into the financial systems in the coming months. “I’ve no idea whether it’s China, the EU, Japan or the US that drives this or maybe a bit of all. Time will tell,” he remarked.

GMI total liquidity index

Pal attributes his investment strategies, especially in tech and crypto, to the insights gained from The Everything Code. This approach has prepared him for the unfolding Macro Summer, with a keen eye on the altcoin market and the so-called “Banana Zone.” He concludes:

But the bigger game is yet to be played out as Alt season arrives and we fully enter the Banana Zone. The Banana Zone cometh, and it is a huge wealth-generating machine. Patience will be rewarded. In the meantime, don’t fuck this up. #DFTU

At press time, BTC traded at $67,003.

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Top 8 Crypto Trends That Will Dominate The Market In 2024: Analyst

Renowned analyst Ted (@tedtalksmacro) has offered a detailed forecast for 2024 in the crypto market. His analysis on X (formerly Twitter) touches on several critical points, from macro events, the Bitcoin Halving to fresh liquidity in the market.

#1 Spot Altcoin ETFs

Following the approval of spot Bitcoin ETFs and the anticipated approval of spot Ethereum ETFs, there is an expectation for a broader range of altcoin ETFs to emerge. Ted believes that the success of these initial ETFs will pave the way for more proposals and approvals, potentially by 2025.

He states, “The SEC has laid the precedent for many other crypto products to be proposed and approved, opening up even more avenues for large capital inflows into the crypto asset class.” Ted specifically mentions Solana and XRP as likely candidates for future ETFs. This development is seen as a significant step in attracting substantial capital inflows into the crypto asset class.

#2 The Federal Reserve Ending Quantitative Tightening

Ted forecasts that the Federal Reserve might cease or significantly slow down its current quantitative tightening (QT) program by Q3 of 2024. This prediction is based on the declining cash balance in reverse repos and aims to avoid a repeat of the funding stress experienced in 2019.

“An end to or a dramatic slowdown of the current QT programme could come even earlier though, given the scars of what happened back in 2019 following the monetary tightening of 2018,” he predicts. An end to QT could inject more liquidity into the market, potentially benefiting crypto assets.

#3 Resurgence Of Liquidity In Crypto

After a challenging period of 18 months marked by the collapse of crypto funds and exchanges and central bank tightening, Ted anticipates a return of liquidity to the crypto space. He points to stablecoin liquidity deltas approaching positive territory and the role of spot Bitcoin ETFs in attracting new capital, especially from investors seeking higher returns amid inflationary pressures.

#4 Bitcoin’s Halving Event

The anticipated Bitcoin halving in April 2024 is expected to create both a supply shock (due to reduced mining rewards) and a demand shock (following the approval of spot BTC ETFs). Historically, halvings have catalyzed significant price movements in Bitcoin, and Ted expects a similar pattern in 2024, with potential for substantial price increases following a brief post-halving sell-off.

#5 Inflation Stabilization

On the topic of inflation, Ted observes, “It typically takes 12-18 months for the full effects of changes in monetary policy to be felt in the economy, and we are verging into that territory now.” Despite the base effects of the 2021/22 inflation fading, Ted foresees a slight resurgence in inflation as economies continue to operate robustly.

However, he believes the central banks’ commitment to maintaining higher interest rates will cap the inflation rate below previous highs. He views this as an integral aspect of a strong economy and market.

#6 AI Advancement

Having witnessed AI go mainstream in 2023, Ted predicts 2024 to be a year of unprecedented improvements in AI technologies. This advancement is expected to boost AI stocks, crypto, and related products, enhancing productivity and potentially leading to deflation in developed economies.

#7 Dispelling Recession Fears

Contrary to predictions of a major recession, Ted anticipates continued economic growth, albeit at a slower pace than in 2023. Ted says, “Those calling for a recession akin to 08 or the Great Depression are likely to be disappointed… again.” He attributes this resilience to governments’ aggressive fiscal policies, including substantial cash injections and running large deficits.

#8 China’s Continued Monetary Expansion

Ted notes that China, struggling in the post-COVID era, is likely to continue its aggressive monetary policy, as evidenced by nearly $1 trillion printed in 2023. He draws parallels with Japan’s situation in the 1990s, highlighting China’s focus on stimulating production over its flailing property market.

In summary, Ted’s analysis for 2024 presents a complex and dynamic picture of the crypto market, influenced by macroeconomic factors, regulatory developments, technological advancements, and geopolitical forces. These trends suggest a year of significant opportunities for investors in the crypto space.

At press time, BTC traded at $47,244, up 5.1% in the last 24 hours.

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Bitcoin And Crypto Face Turbulence As 10-Year US Treasury Yield Hits 15-Year High

In an environment of soaring interest rates and economic unpredictability, Bitcoin and the broader crypto market face increased headwinds. The shift in the financial landscape was recently underscored by the Benchmark 10-year US Treasury yield, which hit a 16-year high this Thursday.

Longest Yield Curve Inversion Ever

Historically, an inverted yield curve, where short-term yields are higher than long-term ones, has been a harbinger of economic downturns. Notably, the 10-Year minus the 3-Month Treasury Yield curve has been inverted for a record 217 trading days. Past data indicates that the longer the delay between the inversion and the start of a recession, the more severe the recession is likely to be.

Joe Consorti, Market Analyst at The Bitcoin Layer, underscored this concern, remarking on Twitter: “The yield curve is re-steepening at breakneck speed. Up by 10 bps or more today across the curve. Do you know what happens when the yield curve steepens, every single time? Hint: not economic expansion.”

The Fed’s recent signals and policy stance have taken the financial world by storm. Charlie Bilello, Chief Market Strategist at Creative Planning, noted, “The 10-Year Treasury Yield moved up to 4.49% today, highest since October 2007. The Real 10-Year Yield (adjusted for expected inflation) of 2.11% is now at the highest level since March 2009.” Bilello also pointed out the significant reduction in the Fed’s balance sheet, which is currently “over 10% below its April 2022 peak.”

The two largest drawdowns over the last 20 years were between December 2008 and February 2009 with 18.2% (balance sheet hit a new high in Jan 2010), and from January 2015 to August 2019 with -16.7% (balance sheet hit a new high in March 2020).

The rise in the 10-Year Treasury Yield was reiterated by the analysts from “The Kobeissi Letter,” who stated: “BREAKING: 10-Year Note Yield officially hits our 4.50% target… The 10-Year Note Yield is up an incredible 20 basis points in less than 24 hours… With supply side inflation out of control and oil prices back to $90+, the Fed has no choice. Higher for longer is back.”

The Federal Reserve’s Stand

During Wednesday’s FOMC meeting, the US central bank and chairman Jerome Powell have made clear its intentions, signaling the potential for an additional rate hike this year and forecasting fewer cuts next year. It now forecasts half a percentage point of rate cuts in 2024. Prior, the dot plot showed cut rates by a full percentage point next year.

This “higher for longer” strategy seems to diverge from the market’s prior expectations, despite three months of seemingly positive inflation data. Moreover, Powell conveyed confidence in the US. economy, emphasizing the need to ensure interest rates are adjusted correctly to achieve the central bank’s 2% inflation target.

However, the market remains uncertain, with the CME Group’s FedWatch Tool indicating only a 32% chance of another rate hike in November and a 45% likelihood by December.

Implications For Bitcoin And Crypto

Risk assets, including Bitcoin and other cryptocurrencies, have historically been sensitive to increases in the 10-Year Treasury Yield. Charles Edwards, founder of Capriole Investments, highlighted the challenges for the Bitcoin and crypto sector:

The Fed wants more unemployment. The job market is still too strong. They’ve raised the expected 2024 rates as a result and the 10YR has broken out to new decade highs. As long as the 10YR is breaking upwards like this, risk assets are going to see further headwinds.

Historically, rising yields are indicative of an expectation of higher interest rates, which increase the cost of borrowing. This scenario often leads to a reduction in speculative investments, with investors favoring more stable, yield-bearing assets over riskier options such as Bitcoin and crypto.

Another problem for the market is the “higher for longer” approach and the massive reduction of the Fed’s balance sheet. Risk assets like Bitcoin are traditionally a “sponge” for high liquidity, but when this dries up in the financial market, they usually suffer the most.

In addition, concerns about a possible recession will continue to rise due to the inverted yield curve. Remarkably, Bitcoin and crypto have never traded in a recession, the reaction is uncertain.

At press time, Bitcoin traded at $26,655.

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This Week In Bitcoin And Crypto: Key Dates That Will Impact Prices

After eight consecutive red daily candlesticks, the Bitcoin price ended the day yesterday (Sunday) with a green daily candle. The Bitcoin and crypto market is entering a week that, while not a macro blockbuster week, could still be trend-setting for the crypto market. Friday in particular could once again be the most important day of the week.

Last week, the US Dollar Index (DXY) bounced up from a historically important support level, putting significant pressure on the Bitcoin and crypto markets. Weaker-than-expected consumer expectations, waning US consumer confidence and sticky core inflation boosted the DXY, which will remain a key focus this week.

Key Dates For Bitcoin And Crypto This Week

On Tuesday 16th at 8:30 am EST, the US Census Bureau will release the final figures for US Retail Sales for the month of April. The final figure for March was -0.6%, well below the forecast of -0.4%. For April, consumer sentiment is forecast to rebound by 0.7%.

Strong consumer spending is seen as supportive for the DXY and could accelerate the rally. On the other hand, if the reading falls short of the forecast, it will indicate that consumers remain reluctant to spend. Accordingly, the DXY is expected to consolidate again, providing a tailwind for Bitcoin and crypto prices.

On Wednesday the 17th at 8:30 am EST, the Census Bureau will release the preliminary figures for US building permits for April. Recently, the US stock market and subsequently the Bitcoin price reacted positively to the better-than-expected housing data.

At 1.430 million, the number of new housing permits issued in April was slightly above forecasts. If the expectation of 1.430 million permits issued is exceeded again, this could be another catalyst for the market.

A day later, on Thursday the 18th (8:30 am EST), the Philadelphia Fed will release its latest manufacturing index. The Philly Fed manufacturing index is considered a leading indicator for the all-important ISM purchasing managers index and could therefore be important for the broader financial market.

If the index comes in below forecasts of -19.0 for the fourth month in a row, the bearish reaction in the financial market is likely to repeat itself as it did last month. An above-forecast reading, on the other hand, would be bullish as it would reduce the likelihood of a recession in the near future.

Friday the 19th is the most important day of the week, as Federal Reserve Chairman Jerome Powell will step in front of the cameras at 5:00 pm EST and could provide new information on the Fed’s interest rate and monetary policy stance in the coming months. Market volatility is likely to increase. Notably, 14 Fed members are scheduled to speak this week, each with a different perspective.

DXY Down, BTC Up?

As far as the DXY is concerned, a decision may soon be imminent. As technical analyst Gert van Lagen explains, the DXY could be due for a head-and-shoulders reversal similar to that seen in 2020/2021 – but this time it is signaling a downtrend rather than an uptrend.

As NewsBTC chief analyst Tony Spilotro recently shared on Twitter, the reversal of the DXY in late 2020 marked the beginning of the Bitcoin bull run. Whether history repeats itself remains to be seen.

At press time, the Bitcoin price rallied to $27,500 while the DXY showed a slight pullback from 102.752 to 102.559.

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This Is How The Bitcoin Price Will Be Affected By Macro: Charles Edwards

In a new interview, Charles Edwards of Capriole Investments shared his Bitcoin theses for 2023. Looking back at the past few months, the renowned expert said those have put the market in a position where Bitcoin offers “a great position for long-term investors.”

As Edwards noted, almost every sentiment metric imaginable fell into the “biggest or second-biggest bearish” range in macro, equities, and crypto. “Pretty much anyone would have said on Twitter last year that we are in a recession or it’s coming to a recession,” the analyst continued.

While Edwards acknowledged that the risk of a recession is far from gone, many key metrics have come back quite a bit. Among them is the housing market, which is slowing and often leads the overall economy.

“So there are a number of metrics which suggest things are slowing down a bit. You got all the big tech names laying off employees and you see this in crypto as well. 10% to 20% cuts have not been unusual in the last months,” the founder of Capriole Investments asserted.

Furthermore, he pointed out an interesting fact: every time inflation peaked above 5% and then fell by more than 20%, the U.S. central bank pivoted. This observation holds true for the last 60 years. “So I think there is a high probability the Fed stops raising rates or reducing rates,” Edwards concluded and further said:

And then we have this deep value situation in crypto which has been playing out the last 3 or 4 months. […] And all that sets up a great opportunity for long-term investors in crypto and equities, as well, risk assets in general.

Fed Pivot Will Propel Bitcoin Upwards Within 6 Months

In general, it is difficult to predict when there will be a regime change at the Fed. However, Edwards believes it will happen within the next 3-6 months. After the forced liquidations in the Bitcoin market over the past 12 months, there is currently no longer any significant selling pressure.

Therefore, according to the Capriole Investments founder, there will be a liquidity crisis on the sell side once larger amounts of Bitcoin buyers return to the market, leading to a squeeze to the upside. “And we saw that kind of short-squeeze play out in the first weeks of January.”

As for the Fed pivot, investors should keep an eye on specific data. While the consensus now seems to be that the Fed will change monetary policy, there are still some risks. Edwards pointed to history in this regard, warning that inflation could rise again.

In the 1970s inflation went through a roller coaster ride and that could be the case for the next 5 to 10 years as well. But I do think the base case for me is at least a rate pause this year, at some point in the coming months.

Moreover, investors should be cautious when employment remains very high. This is “probably the single most important factor leading to recessions.” While this data point is still incredibly strong currently, it could change “any month now” given the layoffs in the big tech sector, according to Edwards.

Equities are also worth considering, he said. If they hit new highs, or if earnings are very strong, if manufacturing picks up and inflation is still at 5% to 6%, then the Fed might think it can keep going because everything is still fine. However, Edwards’s base case looks different:

I think 2023 will generally be a positive year because the Bitcoin price will probably be higher at the end of the year […], but there will be a lot of volatility.

At press time, Bitcoin traded at $23.115.

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