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An independent Bitcoin rise or a high-beta move? Either way, Bitcoin holders are celebrating the latest action to kick off 2023. In fact, all major high-beta plays in the market showed the same strength, last week’s “Bitcoin Rises to $21,000, Shorts Unravel in Biggest Squeeze Since 2021”
While we would like to see an independent Bitcoin rise, there are plenty of signs in the market suggesting the opposite is likely. We saw a relatively significant bounce in 2022’s most oversold name, followed by a brief squeeze from the 2022 lows followed by his round of FOMO.
This recent uptick in risk has been implied by the implied stock market volatility as the US dollar continues to depreciate in the near term, the National Financial Conditions Index (NFCI) loosens and the global M2 money supply contract moves at a much slower pace than last time. It shows that the volatility will drift to new lows. Several months.
Net liquidity, the model we highlighted in our last article, has contracted compared to last year, but hasn’t changed much in recent months. If the sustained uptrend continues, we would expect to see net liquidity growth over the next few months to be the main driver behind this move.
In recent meeting minutes, members of the Federal Reserve Board expressed concern about the “unreasonable easing of financial conditions” caused by the surge in risky assets, subsequently hampering efforts to curb inflation.
A carry trade could be unwound if the Bank of Japan decides whether to ease monetary policy. We believe this is one of the few ways that the rising cost of capital in the US could cause equities to revalue and weaken global equity markets while both dollars could fall at the same time.
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