Monthly Chartbook - Inflation Cooperates, But Is It Enough?

The Monthly Chartbook is a collection of interesting charts and trends we’re watching across crypto and markets.

Macro Outlook

Keeping with the theme of previous iterations of The Chartbook, we ask ourselves the same high-level question. Has anything changed on the macro front given the macro-driven bear market? This month, the answer is…maybe a bit.

At the FOMC meeting on Nov. 1st-2nd, the Fed remained hawkish. Powell reaffirmed his stance once again, stating the committee’s desire to curb inflation at seemingly all cost. At the press conference, Powell received many tough questions around the future trajectory of interest rate hikes. Powell was non-committal, while acknowledging that the pace of hikes will have to come down at some point, although when is still to be determined. Markets have since repriced the December FOMC meeting, placing an ~80% probability of a 50bps rate hike with ~20% probability of 75bps. This is in stark contrast to the probabilities noted just a few weeks prior.

The DXY has finally had a sizable pullback, on the back of November’s CPI print which came in slightly better than expected. It is important to note that while this did not occur in October, during the purview of this Chartbook, it is relevant nonetheless.

We would be remiss to omit the FTX collapse in this report, even though it did not occur in October. We will not go into the entirety of the situation here, so for a full breakdown of events and implications, please read our most recent report The Aftermath of FTX’s Downfall, or watch our discussion from last week’s special edition of Delphi Office Hours.

• In the wake of the most recent FOMC meeting and CPI reports, Fed Fund futures have reacted to the market repricing as we head into the last FOMC meeting of the year. Equities and most risk assets have rallied off of their lows as companies benefited from a stronger-than-expected earnings season and the CPI print coming in lower than expected.

• If we revisit a Chartbook mainstay, we have seen the first real sign of divergences. In the wake of FTX’s collapse, crypto markets have been devastated while other risk-asset markets have been unaffected. BTC has broken down to new lows along with many other coins. ETH is holding on for dear life, as well.

• A common feature of risk assets over the last 12 months is how they have been in constant lockstep with one another. As the fallout from FTX looms ominously over the short-medium term future of crypto, we have seen the first sign of decoupling in risk assets. Unfortunately, this is the last type of decoupling that anyone wants to see.

• Last month, we reiterated the importance of the DXY and how risk assets were largely at the mercy of where it heads in the future.

• We noted how strong the DXY has been during the last 12 months, saying, “The size and pace of the move has pushed the 14-month RSI on the DXY to its highest level since Q1 2015. After such a strong run up, we may see some consolidation here (though we caution that doesn’t mean the dollar bull run is over).”

• Since then, the DXY has seen its first sizable pullback since it started its ascent to multi-decade highs. While fractals do not hold much weight, they can be useful for giving market participants a gauge of how long the relative length of price moves can be, and how to anchor expectations with time.

• Last month, we noted the cyclicality of crypto markets as we head into Q4. We noted that “Q4 has been the best quarter for BTC