ecoinometrics

ecoinometrics

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Data-Driven Bitcoin Macro Strategy For Financial Advisors, Professional & High-Net-Worth Investors

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The bond market is leaning toward rate cuts. The 2-year Treasury yield is drifting lower, signalling expectations that the Fed will keep easing. That would be the ideal scenario for Bitcoin.

Ethereum ETF flows keep closing the gap with Bitcoin. Since mid-July, Bitcoin ETF flows have gone flat. Ethereum, by contrast, is in its strongest inflow streak since launch. While Bitcoin still has a large lead, Ethereum is catching up fast.

Bitcoin’s volatility remains extremely low, even as macro uncertainty peaks. Right now, Bitcoin’s 30-day realized volatility is lower than 83% of the weeks in the past 10 years. Uncertainty yes, panic no.

Bitcoin ended August in the red, despite hitting a new all-time high earlier in the month. That’s a sharp contrast with Ethereum, which gained 15%, well above its 12-month average, as it plays catch-up with Bitcoin.

Inflows are back on the menu for Bitcoin ETFs. After nearly two weeks of outflows, inflows finally returned last week. That’s enough to stabilize the picture for now, though the 30-day net flows remain negative.

The Fed is in a bind: inflation is still running hot while the labor market shows some signs of weakness. Of the two, the labor market looks less concerning. Continued unemployment claims have leveled off, if they stabilize here, that’s not a weak labor market by historical standards. That means inflation stays the Fed’s main concern. And as long as inflation is sticky, the risk is the Fed leans more hawkish than markets expect, a setup that can hit Bitcoin and other risk assets.

Ethereum is rallying, but it’s still not moving independently of Bitcoin. ETH is holding up better than BTC in price terms, but the correlation tells a different story. Over the past five years, ETH’s correlation with BTC has averaged above 0.8 and today it’s still right around that level.

ETF flows are pulling Bitcoin lower. As of Friday, our flows-to-price model put the expected price at $107K, with downside risk below $100K if outflows persist. The macro uncertainty of the past few weeks is showing up directly in the flows.

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