Oh boy where do we start. This week’s commentary is going to be tricky to write given all the noises going on.
Starting with crypto, after breaking through the post-election gap at around ~$92k on BTC, Bitcoin prices collapsed in a straight line down $78k last week with over 3 billion of long futures liquidation as reported by coinglass. BTC was on pace for the worst monthly drop since June 2022, with ETFs seeing the largest monthly outflows in history (-$2.5B in last week alone).
Crypto sentiment (as measured by Alternative’s ‘Fear & Greed’ index) reached an extreme low on Friday as prices collapsed, before the Trump administration ‘intervened’ with a double whammy announcement of a ‘Crypto Summit’ to be held at the White House this week, and then a bold statement that 5 tokens are highlighted to be included in the new strategic reserve (BTC, ETH, SOL, XRP, ADA).
Price action rebounded sharply, with BTC rocketing straight up but stalling at the prior gap at around $92k-$93k, coinciding with the resistance against the long-term trendline. If the administration is taking notes from the Fed on how to manipulate, oh sorry, ‘verbally intervene’ in asset markets, they’ve certainly got an A+ so far in terms of the timing of the squeeze as well as technical entry levels. Are we seeing the implicit ‘Trump put’ being played out in crypto?
However, news of the strategic reserve was not well received by everyone, with long-term decentralisation-supporters and thought-leaders (eg. Naval Ravikant) not throwing in their vote of support, so expect some period of debate and discussion on the reserve basket composition. Will Democrats turn into BTC maximalists to spite the Trump administration in an ironic turn of fate? That would certainly be a hilarious development.
Our immediate bias is to call this a counter-trend rally as the structural forces of a near-term top remain in place (memecoin FUD, trading PNL damage, over-leveraged positioning, risk-off in asset markets, etc), not to mention that the legislative steps towards establishing a Crypto strategy reserve remain a long-road ahead. To be clear, the US President does not have the power (nor money) to purchase crypto assets outright, and Congressional approvals and legislative processes need to be observed, and the funds ‘borrowed into existence’ via Treasury issuance before any tangible actions can be taken.
While we are certainly positive about the direction of travel in terms of narrative, we would caution against over-zealous expectations in the short-term, and that crypto prices will re-correlate with macro risk-on/off forces in the foreseeable future.
Back over in macro, despite the EOD Friday bounce, the most (Trump) policy-sensitive stocks have fallen by ~80% from the election highs, and his volatile demeanor on tariffs and DOGE spending cuts have really started to affect economic sentiment negatively.
While stocks rebounded late Friday on over-sold positions (+1%) to end a tough February, macro sentiment has turned decidedly more negative with most economic surprise indices turning negative. Most notably, Atlanta Fed’s Q1 GDP Nowcast fell by the most on record from +2.2% down to -1.3% last week, citing major weaknesses in exports (-$29B to -250B) and consumer spending (+2.2% to +1.3%) components.
The weakness in growth expectations is compounded by a continued steep drop in consumer credit and housing figures, with pending home sales hitting record lows and housing starting beginning to roll over after the covid-boom.
Meanwhile, Treasury Secretary Bessent appears to pay little heed to the current slowdown, and blaming ‘Bidenflation’ and the previous administration for the current economic stress. More interestingly, he clearly stated that it will only be ‘Trump’s economy’ in ‘6–12 months’, which doesn’t sound like the administration is in any hurry to stem the current slide, and that the equity ‘Trump put’ might only kick in maybe a year’s time.
So if the crypto Trump put is mostly verbal, and the equity Trump put is only active in a year’s time, where’s the real Trump put all this time? We feel that the macro (and crypto) community have missed the forest for the trees, and that the true Trump put has been on fixed income bonds this whole time.
Let’s triangulate on a few observations over the past month:
Yields have been repricing significantly lower and the 1st rate cut has been pushed up from year end to the early summer.
Supercore PCE has been coming lower behind the scenes to hit the lowest since March 2021 (3.096%).
Elon has been explicitly mentioning that the bond market should reward the administration thanks to the DOGE spending cuts.
In one of his X calls in January, Elon stated
“Look, if you’re shorting bonds, I think you’re on the wrong side of the bet”.
In his public interviews, Treasury Secretary Bessent told Bloomberg TV that
“we are not focused on whether the Fed is going to cut… [the Fed] did a jumbo rate cut and the 10-year [yield] went up”, and that the market response raised questions about how effectively monetary policy is influencing the broader economy.
As if that was not clear enough, Bessent added:
“The president wants lower interest rates and … in my talks with him, he and I are focused on the 10-year Treasury,”
“He is not calling on the Fed to lower rates. He believes that if we … deregulate the economy, if we get this tax bill done, if we get energy down, then rates will take care of themselves and the dollar will take care of itself.”
What is clear that Trump’s administration has an advanced understanding of how financial conditions function and the economic pass through benefits of lower long term rates. By focusing on the long end over overnight rates, this is basically what QE / Operation Twist etc were trying to do with balance sheet purchases, but expressed in a different manner.
To be clear, the administration is now explicitly managing the long-end rate lower and letting the benefits of the lower funding rates spill over to the dollar, to equities, and to crypto in the long term. As such, we strongly believe that the current Trump-put is on bonds, and not on stocks, and speculators should proceed as accordingly. (Usual disclaimers apply: DYOR, Not investment advice)
Looking ahead to the week, price action will center around tomorrow’s deadline for the US to impose 25% tariffs on Mexico and Canada, followed by a ECB meeting and NFP on Friday. We see risk holding the recent looks and taking a slight breather after last week’s wild action, and upside is probably capped / to be sold in the near future.
Good luck & good trading!
