Volatility Ramp

Good morning my tasty friends, I hope you’re all having a wonderful start to your weekend.

A bit of an abbreviated note this morning. We’ll be back with a longer form piece next week.

For now, quick update on how we’re thinking about the market.

More war, more volatility, and macro in the driver seat. This is the current theme, and all that really matters for the market right now is the following feedback loop:

Higher oil prices = inflation fears = interest rate volatility = risk off

Of course this isn’t going to last forever and elevated levels of volatility will eventually mean revert, but this is the most powerful force impacting markets. There’s too much uncertainty, so investors want dollars, not high-beta assets.

Inflation fears have also trapped the fed, and financial conditions are tightening.

The 2Y yield jumped +30 basis points in 2 weeks, the market is pricing out any near-term rate cuts and is instead beginning to price in the possibility the Fed may need to stay higher for even longer than currently expected. This is not isolated to the US either, as global rates are rising while inflation is reaccelerating everywhere.

Volatility is ramping higher. Especially in oil and the bond market. Until this volatility subsides and reverts towards the mean, it’s unlikely BTC can retake its bullish trend, which means we should continue chopping within the larger range of approximately 60-75k.

As we’ve discussed over the past 1-2 months, there’s unlikely to be any meaningful recovery in crypto until volatility subsides (the signal), and not only is volatility not declining, it’s expanding massively on the heels of war in Iran and the uncertainty surrounding the potential impact on the global economy.

Crypto is bearish. Most high-beta/long-duration risk assets are in a bearish trend (see Mag 7 stocks). There will be rallies, but until the macro conditions change, and we get volatility and price action confirmation, expect the beatings to continue.

For BTC to retake a bullish trend we now need to see it over $75k, and ETH above $2,400. On the downside, 60k is the level I’m watching. Historically BTC has pulled back to its 200 week moving average each cycle, which currently sits at $59,200.

Looking ahead, our current volatility derived estimated trading ranges are below. These are not static ranges of course, but provide a sense of probabilistic price action in the short-term.

This is not an easy market environment to navigate, especially outside of crypto. Not much is working beyond oil/energy equities, and eventually there will be large counter-trend corrections there too.

In the meantime, you need to adapt to the extreme cross-asset class volatility. This means patience, shorter timeframes, and appropriate position sizing (smaller) as we ride it out.

That’s it for this week. Until then, keep your head on a swivel.

Stay tasty,

Ryan

Trading platform and brokerage: tastytrade

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Disclaimer: None of this is to be deemed legal or financial advice of any kind and are solely the opinions of the authors. tastycrypto is provided by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. and tastytrade, Inc. Neither tastylive, Inc. nor tastytrade, Inc. are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors.