Following the collapse of Alameda and FTX, crypto's correlations to legacy markets have completely come off.
As an asset class, this is the most independent crypto has traded for over a year. For most asset allocators and traders, this is generally favorable because it increases the number of uncorrelated assets to profit from.
A big problem for crypto traders is they've been merely riding on a short volatility vehicle that's been tightly correlated to long-duration growth stocks.
All crypto has offered in this period is Beta rather than a unique directional market.
So it's certainly been nice to see some dislocation from equity markets -- even if crypto's been lagging hard following the FTX fiasco.
But my bet is this correlation between stocks and crypto will more than likely return in the coming weeks and prove a durable feature of the landscape.
You might not like it, but we must always deal with reality whenever money's on the table.
The yield curve is getting a lot of attention right now, and deservedly so. An inversion in the spread between the 10-year and 3-month Treasury yields has an unblemished record in anticipating recessions. But beyond that suite of indicators, there is actually evidence that macro conditions have stopped deteriorating.
Back in June, we published a report assessing the asymmetric opportunity to dollar-cost average into Bitcoin.
We concluded that mass liquidations driving Bitcoin back to levels last seen in 2017 represented a favorable opportunity for crypto investors to begin scaling into long-term spot positions.
In the almost exactly five months since then, Bitcoin has continued to creep lower, nearing 15,000. This price action validates the DCA strategy, and it looks even more favorable for long-term crypto investors.
Let's revisit the underpinnings of the strategy in light of recent history.
