📊 Food For Thought Pt 2

In last week’s edition of Market Insights, “Markets Gear Up For Dreaded September”, we spent some time reflecting on the Jackson Hole comments, and more importantly, the market’s reaction to these comments. Suffice to say, the market was caught off guard by the seemingly hawkish rhetoric coming from Powell. This was evidenced by the sharp market pullback sending BTC back below its 2017 ATHs, and the repricing in the odds of a 75bps rate hike at the September FOMC meeting at nearly 86%.

Last week, we mentioned the historically poor performance that BTC usually experiences in September. On average, BTC typically declines just over 6% during the month of September, with several instances of steeper declines. Given the recent bear market rally, market structure analysis, and the subsequent comments coming from Jackson Hole, we reiterated our cautiousness heading into September.

We focused on two key areas of the market in terms of our analysis which led us to having this cautious outlook; market psychology and market positioning.

“The reaction to the Jackson Hole comments was reminiscent of the reaction markets had in early June to the much hotter than expected CPI print. At the time, it appeared as though everyone (Powell included) had taken the stance that inflation might be peaking. When the reality of higher-than-expected inflation shattered the market’s expectations, asset prices headed lower. Market participants ultimately had to reassess and reposition for the new reality, resulting in a large selloff.”
“Over the last 3-months, we have seen risk appetite return to crypto markets as risk assets rallied across the board.