Pro Crypto Insider Talks - July 2024

Real Vision’s Raoul Pal and Delphi Digital’s Kevin Kelly are back to discuss the latest trends in macro and crypto. In this month’s episode, they discuss several key topics, including:

• Latest selloff in US tech stocks & divergence with crypto majors
• Impact of the JPY carry trade unwind
• Expectations for Fed policy + this week’s FOMC meeting
• Global Liquidity outlook for 2H 2024 heading into 2025
• Similarities to 2017 cycle
• Influence of political movements on crypto markets
• Why market momentum indicators favor the bulls
• SOL’s breakout & key levels to watch
• The risk/reward tradeoffs of the barbell portfolio approach

This episode was recorded on July 30th, 2024.

Social Links:

• Kevin’s Twitter
• Raoul’s Twitter

TRANSCRIPT

Welcome to Crypto Insider Talks. I’m Ash Bennington, joined by our guests as always, Raoul Powell and Kevin Kelly. Gentlemen, welcome back.

Excuse me?

It’s time to be here.

Coughing on my cup of tea.

That’s very British of you.

It is.

Thought it might be chicken broth.

We don’t. We don’t check on chicken bones here. We worship. We worship.

We’re ripping up the script today, no questions out of the gate. I I don’t know where to begin with the conversation we just had offline.

Nothing. It’s all about Kevin’s charts. Let’s get to Kevin’s charts.

Yeah, you want me to, you want me to play the the role of Raul here, the the adult man for this one.

Yes.

Yes, Raul, us up with some good macro charts. Kevin, we’re I promise. Don’t worry, we’re not.

This will this will deteriorate quickly, I’m sure. No, I think yeah, let me just, I’m going to fire up because I think a good place to start would just be a nice little. So I’m serious.

For the 1st 20 minutes at least. Kevin.

Yeah, yeah, we’ll try and keep keep a straight face. So in my view, I mean, I think a lot of the trends we talked about the last couple of months are still in play when it comes to, you know, crypto Bitcoin trending back towards all time highs. You had obviously the Bitcoin 2024 event being the big news of the last week or so with Trump as mother political candidates put in crypto front and center. That combined with I think the reduction in cell pressure we’ve seen from some of the Mt Gox distributions that everyone was concerned about the announcement of the unlocking and returning of.

I think it’s somewhere north of $10 billion of capital DAF TX creditors. We start to see Bitcoin ETF inflows pick back up. Obviously the ETF launched I think by and large are relatively successful even though it’s only been a couple days. Those are trending I think in line with how we expected initially. But I think the big thing is this shift towards more or a more favorable macro and liquidity backdrop heading into, you know the second-half of this year and into 2025. And I’ll get into a couple of charts that that explain that. I think one of the big things that has been on a lot of people’s minds the last week or so, really couple weeks is we’ve seen this initially, we had this divergent between crypto and equities, right, crypto and stocks.

And over the last couple weeks, we’ve kind of seen the two reverse, right? A big reason for that or a big topic everyone’s talking about is this deleveraging kind of trade that we’ve seen over the last couple weeks, in part sparked by, you know, the pretty rapid appreciation of the Japanese yen that as we talked about last month was really just falling off a Cliff, right. So this first chart religious shows tries to highlight how that that yen carry trade. I think it’s actually been pretty influential on, you know, US assets in U.S. markets because Japanese, especially retail investors are pretty, pretty big investors in in foreign assets and specifically US assets.

So it’s one that I think is definitely top of mind. I personally and would love to hear Ralph’s thoughts in a second, think that the that carry trade will probably still be a pretty big, big portion of the market going into the second-half of this year. Because even though you’ve got this now shift of lower yield expectations right within the US kind of match with Fed potentially coming out tomorrow and setting expectations for September rate cut, you’d expect to see that differential between rates come in a bit, which certainly could and has, I think given the, the, the yen a bit of a boost here.

But I think that rate differential still be wide enough that the N carry trade can continue to serve as support for global markets. So that’s one kind of big one. Just on the, the macro equity side, as we dig in a thing, you know, a bit more, I think what’s interesting is you’ve seen tech pull back a bit, right? Part of this was, you know, you contribute maybe the the deleveraging argument we just were talking about part of it too is just that tack and really looking at the NASDAQ 100 here has just been on an absolute tear this year, right?

We all know that. So you could argue that we’re pretty pretty due for a bit of a pullback and consolidation here. What I think is interesting is there’s been a lot of chatter about, you know, markets being overpriced, market being overvalued again, How sustainable is this year to date rally? You know, we know that markets don’t go up into the right forever, right? You have these periods both in equities, crypto, you name it, where you have these these much needed healthy pull backs. I’ve run this chart really interesting. I, I love to run back tests on kind of longer term time horizons.

And this looks at again, the NASDAQ 100 basically runs a back test on when it’s monthly RSI crosses above 70, right. And so the big thing that jumps out to me is one we have seen, obviously a pretty sizable, you know, steep appreciation in, in, in tech specifically, But it’s not as if these levels have gotten anything too crazy, at least compared to where, you know, the, the momentum levels that we saw in, in prior, pre prior sell offs. Another thing is that when you run this and you look at the kind of hit rate, I mean, what this basically tells us is that aside from, I think it was the 2007.

Pretty much every time you’ve seen this monthly RSI cross above 70, it’s actually been an indication to buy because the market’s been higher 16 out of 17 * 12 months later. And so it’s, it’s one of those interesting kind of dynamics where when you look at things, when you zoom in on things, right, And just look at this year, some of those charts, you know, some people can make their own those, some of those charts are egregious. When you take a step back, market really isn’t that crazy or, or I think that as crazy as a lot of people maybe make it out to be.

And so I love running these types of charts again, especially towards like month end when you’re doing monthly candles and all that, just to kind of put things in perspective. And you can do this on a number of assets, right? If you look at gold, gold, very similar, right? This goes those, the last chart went back to 1990. So does this one really this captures the last 25 years or so, early 2000s, same thing gold reaches, you know, cross above that, that monthly RSI above 70. And typically that tends to be a pretty bullish indicator. You know, again, 15 out of the last 16 times, you know, gold was higher 12 months later, run the same thing on Bitcoin, right?

Again, much shorter time time horizon time period. But some of these notable breaks were breaks, breaks above these momentum, key momentum levels were end of 2020, end of 2012, right? So that was before the 2013 run up here. This one was the end of 2016, before the 2017 bull market, when it first broke above RSI, above 70 was November of 2020, right ahead of the 2021 bull market. Yes, you have this indicator here around what was this? Yeah, end of 2021 as we’d expect, where, you know, things really did get crazy. But again, I think it puts it in perspective that these types of longer term momentum indicators are exactly that, right?

It doesn’t actually mean that stocks are overbought or you know, in this case Bitcoin is overbought. It actually serves as a longer term kind of support for a continuation of the trends that you’re seeing. So those are kind of just on the more, I guess technical and momentum side. What I’ve been looking at next big one, this is this is pretty simple. We’ve been talking about this for a while. Bitcoin still tracking, you know, it’s it’s prior cycles in part because a lot of the prior cycles have emulated what we’re seeing in present day and what we see in this cycle.

Big one obviously being liquidity. This is something I’m sure we’ll talk a bunch