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TLDR
DXY and Bleeding Stocks
Velocity and Bitcoin Stability
Upcoming Macro Events
October Spotlight - Altcoins
A Green October Awaits
Let’s face it, the Dollar Currency Index (DXY) is on a bull run. The index is at a 20-year high, which is a good news for long-term investors.
But what is DXY?
DXY is a measure of the strength of the Dollar over other currencies. A strong Dollar increases the demand for the Dollar and promotes saving cash instead of investing in assets. It negatively affects stocks and cryptocurrencies.
Let’s take a quick look at the S&P 500.
Crypto follows macro unless there is a large-scale tech decoupling. Although the chances are slim, a web3 adoption storm could do the needful. Okay, no more hopium; let’s see how DXY affects Bitcoin.
A falling DXY can precipitate a massive bull run in risky assets. But when the DXY pumps, investors lose confidence in stocks and other volatile assets. Although the strength is measured against a basket of currencies, the final number has a psychological gravity over ordinary investors.
Well-known investors have been deploying capital since June, but most have sold their investments in panic. Nonetheless, keep in mind that S&P 500 has fallen into a 2-year low.
Bitcoin Velocity is the ratio of the total amount of BTC moved in a year and the total BTC supply. It simply indicates how fast the market distributes Bitcoin. Bitcoin velocity has been in an uptrend since August 2020.
August 2020 also marks the beginning of the parabolic bull run. It is no coincidence that the bull run and bitcoin velocity both changed gears in August 2020.
For any economy, velocity is a good indicator of a healthy market. When the stakeholders exchange money quickly, the value it serves increases. That means when $1 is exchanged four times, it serves as a $4 total value. But we are not here to learn economics but to understand how velocity can affect Bitcoin price action.
Despite the bear market, Bitcoin velocity was high, which means volatility and liquidity were high. Please note that the word volatility doesn't mean a bad thing; instead, volatility is a feature of cryptos, and we all love good volatility.
Institutional investors like MicroStrategy kept the velocity high even in the bear market. But since MicroStrategy appears to have bought enough (For Saylor, the whole 21 million Bitcoin can only be enough. We all appreciate his enthusiasm!) and thus the decrease in volatility can extend for some time.
Ideally, a minor decrease in velocity is not a concern. However, it suggests that even a tiny amount of Bitcoin can play a significant part in a dump.
Oct 13 - FOMC Core Inflation - A critical event.
The forecast suggests an increase in inflation. We do not know what the actual numbers will be, but if the inflation rate increases, the market is likely to dip.
However, if the inflation numbers are reduced, the market will pump for some hours and return to normal levels.
Overall, I expect October to be green. So that calls for buying the October dip for short-term gains.
Oct 28 - Personal Spending Data Stats - Moderately impactful event
BEA’s personal income data shows a flattened curve. In July, there were fewer changes than in June.
That’s why I am expecting similar data for August and September. So the income stats might not impact the market or have minimal impact.
Traders can make use of the volatility. How?
Check the expected inflation rate, https://tradingeconomics.com/united-states/forecast - This is one of my favorite forecast tools. Check for CPI (Consumer Price Index) ** **
According to tradingeconomics, the predicted CPI is 7.3% in Q4, 2022.
Overall CPI in Q3 was 8.3%. So macroeconomic experts predict less inflation in Q4, starting from October 2022.
CPI is simply the inflation felt by consumers (reflection of the price hike or price fall for consumer goods at retail prices)
When FOMC declares the CPI to be 8% or less, you can open a long position.
On the other hand, if CPI is more than 8.3%, say 8.4% or 8.5%, you can open a short position.
Check the DXY (Dollar Currency Index) graph - https://investing.com/indices/usdollar **
**
If DXY trends upwards of 114.5, open a short position. You can use the same to determine whether to close previous short positions.
If DXY falls below 113, open a long position, or close the short position.
These numbers are relative and are valid for October only.
Cosmos (ATOM) has been trending in September because of the Cosmoverse. It might continue to trend even in October, as the community expects exciting announcements.
Kava 11 is a bullish event for Kava and the cosmos ecosystem in general. ATOM, KAVA, and DYDX could benefit.
ETH has seen a high volume, sell-the-news event. So ETH and altcoins might outperform BTC in October. (Dominance is low)
Lukso has a successful testnet. They have announced ecosystem expansion by awarding some community projects. We expect Lukso to announce the mainnet in October, and that makes Lukso a good buy. However, post mainnet, lots of coins will come into supply + sell-the-news event. So you can sell it after the mainnet pump (to rebuy later)
In recent years, October has outperformed September in the macro market.
Even for Bitcoin, October was relatively a good month for investors.
In 2022, September has seen record sell volumes, and still, Bitcoin managed to stay above 18k. In October, there are not many bearish events also.
Mt Gox unlock is not yet announced. It could be a panic sell event (the day of announcement and the day of distribution). So when that happens, treat it as a great buying opportunity.
Digital Fund Flows remain net positive even in a bearish month. That means people are selling crypto and holding stablecoins. It is a positive sign for market health.
After the Mt Gox unlock, if the fund flow returns a net negative, it will signal an extended bear market. If the fund flow remains net positive in October, it is a strong buy indicator.
You can check the fund flow data from Coinshares or Arcan Research. Although it is a lagging indicator, any tool can be handy in a bear market.
Well, that’s it for the week.
Count on the light at the end of the tunnel Some tunnels just happen to be longer than others But crypto is here to stay, DCA and chill :) And remember, microcap 100X gains are NOT made in bear markets.
TLDR
DXY and Bleeding Stocks
Velocity and Bitcoin Stability
Upcoming Macro Events
October Spotlight - Altcoins
A Green October Awaits
Let’s face it, the Dollar Currency Index (DXY) is on a bull run. The index is at a 20-year high, which is a good news for long-term investors.
But what is DXY?
DXY is a measure of the strength of the Dollar over other currencies. A strong Dollar increases the demand for the Dollar and promotes saving cash instead of investing in assets. It negatively affects stocks and cryptocurrencies.
Let’s take a quick look at the S&P 500.
Crypto follows macro unless there is a large-scale tech decoupling. Although the chances are slim, a web3 adoption storm could do the needful. Okay, no more hopium; let’s see how DXY affects Bitcoin.
A falling DXY can precipitate a massive bull run in risky assets. But when the DXY pumps, investors lose confidence in stocks and other volatile assets. Although the strength is measured against a basket of currencies, the final number has a psychological gravity over ordinary investors.
Well-known investors have been deploying capital since June, but most have sold their investments in panic. Nonetheless, keep in mind that S&P 500 has fallen into a 2-year low.
Bitcoin Velocity is the ratio of the total amount of BTC moved in a year and the total BTC supply. It simply indicates how fast the market distributes Bitcoin. Bitcoin velocity has been in an uptrend since August 2020.
August 2020 also marks the beginning of the parabolic bull run. It is no coincidence that the bull run and bitcoin velocity both changed gears in August 2020.
For any economy, velocity is a good indicator of a healthy market. When the stakeholders exchange money quickly, the value it serves increases. That means when $1 is exchanged four times, it serves as a $4 total value. But we are not here to learn economics but to understand how velocity can affect Bitcoin price action.
Despite the bear market, Bitcoin velocity was high, which means volatility and liquidity were high. Please note that the word volatility doesn't mean a bad thing; instead, volatility is a feature of cryptos, and we all love good volatility.
Institutional investors like MicroStrategy kept the velocity high even in the bear market. But since MicroStrategy appears to have bought enough (For Saylor, the whole 21 million Bitcoin can only be enough. We all appreciate his enthusiasm!) and thus the decrease in volatility can extend for some time.
Ideally, a minor decrease in velocity is not a concern. However, it suggests that even a tiny amount of Bitcoin can play a significant part in a dump.
Oct 13 - FOMC Core Inflation - A critical event.
The forecast suggests an increase in inflation. We do not know what the actual numbers will be, but if the inflation rate increases, the market is likely to dip.
However, if the inflation numbers are reduced, the market will pump for some hours and return to normal levels.
Overall, I expect October to be green. So that calls for buying the October dip for short-term gains.
Oct 28 - Personal Spending Data Stats - Moderately impactful event
BEA’s personal income data shows a flattened curve. In July, there were fewer changes than in June.
That’s why I am expecting similar data for August and September. So the income stats might not impact the market or have minimal impact.
Traders can make use of the volatility. How?
Check the expected inflation rate, https://tradingeconomics.com/united-states/forecast - This is one of my favorite forecast tools. Check for CPI (Consumer Price Index) ** **
According to tradingeconomics, the predicted CPI is 7.3% in Q4, 2022.
Overall CPI in Q3 was 8.3%. So macroeconomic experts predict less inflation in Q4, starting from October 2022.
CPI is simply the inflation felt by consumers (reflection of the price hike or price fall for consumer goods at retail prices)
When FOMC declares the CPI to be 8% or less, you can open a long position.
On the other hand, if CPI is more than 8.3%, say 8.4% or 8.5%, you can open a short position.
Check the DXY (Dollar Currency Index) graph - https://investing.com/indices/usdollar **
**
If DXY trends upwards of 114.5, open a short position. You can use the same to determine whether to close previous short positions.
If DXY falls below 113, open a long position, or close the short position.
These numbers are relative and are valid for October only.
Cosmos (ATOM) has been trending in September because of the Cosmoverse. It might continue to trend even in October, as the community expects exciting announcements.
Kava 11 is a bullish event for Kava and the cosmos ecosystem in general. ATOM, KAVA, and DYDX could benefit.
ETH has seen a high volume, sell-the-news event. So ETH and altcoins might outperform BTC in October. (Dominance is low)
Lukso has a successful testnet. They have announced ecosystem expansion by awarding some community projects. We expect Lukso to announce the mainnet in October, and that makes Lukso a good buy. However, post mainnet, lots of coins will come into supply + sell-the-news event. So you can sell it after the mainnet pump (to rebuy later)
In recent years, October has outperformed September in the macro market.
Even for Bitcoin, October was relatively a good month for investors.
In 2022, September has seen record sell volumes, and still, Bitcoin managed to stay above 18k. In October, there are not many bearish events also.
Mt Gox unlock is not yet announced. It could be a panic sell event (the day of announcement and the day of distribution). So when that happens, treat it as a great buying opportunity.
Digital Fund Flows remain net positive even in a bearish month. That means people are selling crypto and holding stablecoins. It is a positive sign for market health.
After the Mt Gox unlock, if the fund flow returns a net negative, it will signal an extended bear market. If the fund flow remains net positive in October, it is a strong buy indicator.
You can check the fund flow data from Coinshares or Arcan Research. Although it is a lagging indicator, any tool can be handy in a bear market.
Well, that’s it for the week.
Count on the light at the end of the tunnel Some tunnels just happen to be longer than others But crypto is here to stay, DCA and chill :) And remember, microcap 100X gains are NOT made in bear markets.
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