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Market outlook unclear while macro catalysts remain pending
Over the past four weeks we have seen substantial selling from the largest whale cohort. Holders with more than 100k bitcoin have offloaded around US$5.98B, and this has been mirrored in ETP flows where outflows have reached US$5B over the same period. Interestingly, another group of whales, those holding between 10k and 100k bitcoin, have been net buyers, adding roughly US$3.1B.Opinion in the crypto community is clearly split. Smaller whales appear comfortable absorbing the coins being sold by larger and theoretically older holders. Some are referring to this as Bitcoin’s IPO moment, where long-standing early holders pass supply to a newer generation. It also aligns with the four year cycle narrative. While this cycle lacks statistical rigour, given the sample size of only four, it has become somewhat self fulfilling. For now there is little evidence that large whale selling has run its course.
Policymakers still split
It is therefore up to macro data to improve the situation. We have stated in recent weeks that we expect the Fed to cut interest rates in December and our view has not changed, despite the futures market rapidly repricing off very limited economic data. The FOMC minutes released this week showed policymakers remain sharply divided on whether to cut again in December. Some favour another cut, others prefer caution and a few want to hold rates steady. They also emphasised that inflation remains above the 2%, a concern for those arguing against easing.At the same time they acknowledged that the labour market is softening, although still relatively tight. Combined with the better September payrolls figures, many investors seem to believe the employment backdrop has stabilised. We think this interpretation is short term in nature. Weekly ADP data, Challenger job cuts, JOLTS vacancies and the rise in unemployment to 4.4% (highest since 2021) all point to weakening conditions. With so few data points available, a focus on the key macro releases post-shutdown is essential for assessing the direction of digital assets. Between now and the December FOMC meeting the important releases are Core PCE on 26 November, ISM Manufacturing on 29 November, Nonfarm Payrolls on 5 December and the mid December CPI report. We believe these will collectively show continued economic weakness, increasing the likelihood of a rate cut. We therefore believe the price falls recently seen in digital assets are not indicating a long-term bear market, rather a buying opportunity.
