For every asset you own, it's essential to understand its drivers.

We do this all the time when looking at the components of ETFs and funds and evaluating intermarket correlations, and crypto shouldn't be any different.

As we outlined in yesterday's note, the recently observed increased correlation between Bitcoin and legacy markets is something to be mindful of in the near term.

Volatility in the macro environment is likely to be a headwind for most major crypto assets in the coming weeks.

Bitcoin has been dragged down by legacy market volatility, even as investors continue a strong regime of buying.

The crypto market isn't fully out of the woods as far as volatility is concerned, and there are risks to be mindful of in the coming days and weeks.

But the picture remains positive for Bitcoin and the overall crypto landscape through the end of the year and into 2022.

Given the recent volatility over the last few hours, we wanted to quickly send this update ahead of the recording of our weekly conference call to detail what's taken place and to discuss our approach to lower time frames right now.

In yesterday's note, we outlined the following:

The most likely selling event would be driven by derivative volatility through a cascading of long liquidation forced selling pressure. There is certainly a possibility this could take place, with funding still pointing to bullish positioning from speculators, but it looks unlikely with the strength of spot flows supporting the market right now.

This is primarily where we've seen the selling pressure take place, with over $750M of liquidations experienced over the last 24 hours. As much as on-chain spot-buying drives long-term cycles, the derivative markets ultimately get the final say for lower time frames.

If we know one fact about markets, it's that they trend.

Markets trend; it's why technical analysis works.

Unlike what the university professors will argue, returns are not normally distributed.

It doesn’t matter if you’re a technical analyst, a fundamental analyst, an economist, or whether you look at the moon and the stars to make your buy/sell decisions. You can't argue with the fact that stock prices trend.

Over the last few weeks, we've been in the camp that Bitcoin and most other primary crypto assets will resolve higher into the remainder of the year.

The macro accumulation pointing to a bull run over longer time frames remains intact. But things have certainly been messy in recent weeks, with Bitcoin losing a key level of interest this weekend.

The thesis was that if Bitcoin was below 58,000, the downside risks become elevated for long positions, and elevated cash levels are prudent.

Bitcoin continues to flirt with this level, and the price action in most cryptos looks messy in the near term.

This is the video recording of our November 19, 2021, All Star Charts Crypto Weekly Strategy Session.

Over the last few days, we've made our thoughts pretty clear regarding the broader crypto market over long and short time horizons.

So let's have a quick summary:

There's been some downside volatility over the last few days.

When the market is indiscriminately selling off, we're looking for the small patches of green -- the names that are bucking the trend and resisting the selling pressure or even moving higher.

When the red of the market turns green, the green has a tendency to turn even greener.

It's relative strength at its best.

So given the current backdrop of this recent near-term volatility, let's pose the same question.

Where's the leadership?

There's been some notable volatility over the last 24 hours, with Bitcoin and Ethereum losing 8% and 10% respectively over this period.

Throughout this recent selling, over $840 million worth of positions have been liquidated.

We want to emphasize that Bitcoin is still in its sideways range, and we haven't seen a decisive breakdown. As we outlined in yesterday's note, looking out longer timeframes, this merely seems like a springboard to further upside.

If Bitcoin is above 58,000, we need to continue giving the bulls the benefit of the doubt.

If on the other hand Bitcoin loses these lows, then a more defensive approach is likely better.

For those with longer timeframes, a potential retest of 53,000 would provide an excellent level to add to long-term spot positions, if we even get there (not the bet we're making).

Over the last few weeks, we've been making the case that Bitcoin is likely to resolve to the upside and head toward our first target of 85,000.

In a note we published last Monday, we outlined a variety of developments taking place that's been supporting our macro bullish thesis. Since then, Bitcoin has continued to consolidate following its run-up after achieving all-time highs, and we haven't seen any dramatic price action in either direction.

So, in today's post, we'll be revisiting some of the data points we're heavily weighing towards our approach in the coming weeks.

Price Stability at a Local Maximum

In recent weeks, we've been discussing the compression of volatility in a lot of crypto assets, primarily Bitcoin.

This is the video recording of our November 12, 2021, All Star Charts Crypto Weekly Strategy Session.

Yesterday, there was plenty of action.

In the morning, the uptick in the CPI pushed Bitcoin immediately higher.

Throughout this short period, open interest spiked higher as longs jumped into late positions. This combined with FTX going offline contributed to a perfect storm for a minor shakeout of over-leveraged longs.

Despite this choppy action yesterday, this doesn't sway our bullish thesis.