12 Oct 2023
Week 41, 2023 - Weekly Market Outlook
The weekly market outlook article will provide a brief analysis of the past week's market performance and an outlook for the upcoming week.
Introduction
In this weekly market outlook, we examine the most recent updates in the crypto space. With an emphasis on Bitcoin and the recent macro environment, we analyze recent price action. We also go through the DeFi stablecoin flow and we rank the crypto market's gainers and losers. Finally, evaluate the Flagship Portfolio Vault performance for the last week
Macro
This week witnessed a couple of key events that have significantly impacted markets. On Saturday the 7th of October , Hamas, a Palestinian militant group designated as a terrorist organization by the U.S. government, launched an attack on Israel. Despite the tragic geopolitical turmoil in the Middle East, equity markets seemed to shrug off the incident; however, the crypto markets reacted, with Bitcoin dropping 4.5% since Saturday.
The major driver behind over half of this movement was the recent reading of the Producer Price Index (PPI) in the U.S. The data showed that producer prices in September surged more than anticipated. The Producer Price Index escalated by 2.2% on a yearly basis in September, marking an increase from the 2% rise noted in August. This surge surpassed the market's forecast of a 1.6% increment.
Flagship remains bearish on crypto because is not aligning with either the global liquidity index or the US equity market. Both these indicators seem to be moving in tandem, but crypto is lagging behind. Additionally, the weakness in crypto is accentuated as the dollar index is at a high time frame support. If we begin to see the dollar index closing below support and within its range, we can consider increasing our positions in long risk assets.
Bitcoin
The US CPI report for September will be released on Thursday, October 12.
Traders expect the US CPI report for September to come in at 0.3% month-over-month , with the Core CPI expected at 0.3% m/m.
For most US citizens gasoline prices are by far the most visible, visceral way they experience inflation. On that front, the September CPI report is unlikely to bring additional pain as the market is already expecting the September CPI report to be higher than expectations.
Bitcoin has declined by 3.51% over the last 7 days and has lost its short-term EMA trend. Although Bitcoin did lose its short-term trend, it is now at weekly support. If Bitcoin can hold its weekly support, and start to recouple to equities, I think we can reach $29,000 soon.
Crypto best and worst performers
Our best performers seem to be a bunch of random altcoins and kujira. Kujira recently released their premier Money Market: GHOST. GHOST allows you to mobilize your assets by lending them out to earn interest and secure working liquidity by using them as collateral. Ghost has attracted more liquidity to the Kujira ecosystem.
Radix seems to be one of the biggest losers this week. This is due to the market selling off as their ecosystem and mainnet just went live. It will be worth keeping an eye on the capital inflow into the radix ecosystem.
Stablecoin Flows
The total market cap of stablecoins has remained stable at $124 billion. The Total Value Locked (TVL) of stablecoins in DeFi has dropped by about $4 billion in the last 7 days. Without a sustained rise in stablecoin TVL, we won’t see a prolonged period of bullishness. Should there be an increase in stablecoin TVL, possibly due to a liquidity event like the issuance of new stimulus checks, we could potentially kickstart the bull market again.
Flagship Portfolio Vault Performance
Over the past 7 days, the share price of the Portfolio Vault went from 27.52 to 27.37, which is an 0.59% decrease. Over this period, Bitcoin’s price changed -3.51%, meaning we outperformed the leading crypto by 2.91%.
Our risk profile remains unchanged; it has stayed bearish. The primary reason for maintaining a bearish stance is the observed downside decorrelation of crypto markets with equity markets. While equity markets have demonstrated strength, crypto markets have exhibited weakness. Should crypto markets also display some strength, we will reevaluate our current risk profile.
If you’d like to access Flagship’s portfolio Vault, click here.
Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.
