Uncertainty – A word broadly disliked by Mr. Market
Things are moving fast—extremely fast. The newsreel is running at an immense pace, and staying up to date on the relevant storylines is a task beyond mortal men. This rapidly evolving post-Trump landscape introduces a well of uncertainties, the long-term implications of which are near impossible to assess in real time. The pragmatic and rational response to these uncertainties in financial markets is to derisk and reassess. In the crosshairs of the stiff Ukraine/Russia negotiation and tariff interpretations, we find BTC and the broad crypto market grinding through week after week of weak price action. Uncertainty is weighing on the market, and the timeline of when this uncertainty will settle is, well, uncertain.The market hates uncertainty. In BTC, we have seen the impact of uncertainties for weeks. ETF flows and derivatives exposure have been stagnant since the inauguration. Traders’ current modus operandi has been to reduce risk while adopting a wait-and-see approach. Traders have been responsive to news, selling into new tariff announcements while maintaining nimble and cautious strategies.Settling into a new range
All this risk aversion and uncertainty has pushed crypto prices toward more attractive levels. As of writing, BTC is trading at $83,100, down 24% from its all-time high. I reduced exposure on inauguration day, a move motivated by clear tendencies of froth running into January 20. At current price levels, I am gradually re-entering the market.The grind lower throughout February has altered froth into apathy. The response of traders has been roaring clear for weeks now; exposure has been on a downward trend in the institutional side of the market (CME), and yields have plummeted. Demand to add long exposure amidst the ongoing global chicanery is not here. Further, leveraged ETFs are holding exposure equivalent to pre-election levels, open interest in perps is at September lows, and funding rates point toward a substantially lower likelihood of long squeezes ahead. Apathy like this is rarely a short-lived market phenomenon, but it represents an attractive area to rebuild exposure.My base case is that Bitcoin will spend some time consolidating within this lower range. The rapid and intense post-election rally propelled BTC from $75K to $88K in a matter of days—an area where I expect the market to settle and establish a foothold in the coming weeks. In my January outlook explaining my intention to sell the inauguration, I wrote, “I’ll then look for entries at lower levels, with $75,000 striking out as a likely area for the price to return sometime in 2025, both to retest the former ATH and to fill the post-election CME gap.”, a plan that I am currently committing to.
