Macro update

Last week was less about new catalysts than it was about digesting the abrupt repricing of December’s rate-cut expectation. The probability of a cut fell from ~70% to ~42% in just about a week, which had an amplified impact on the market in the light of other macro data points not being reported.

J. Powell walking back the almost certain December cut forced investors to drill into the FOMC members’ individual preferences, revealing the cut was far from consensus, and the response was immediate: U.S. risk assets softened and crypto, still the most sentiment-sensitive risk asset, got hit the hardest.

Across different asset classes, digital assets remain at the bottom of the performance quilt. The underperformance isn’t new, crypto has been lagging equities since early summer, in part due to crypto’s continued negative skew vs equities (as discussed last week). What stands out is that BTC and ETH actually underperformed the aggregate of alts, which rarely happens in a down-tape. Two things explain this:

• Alts have been bleeding already for a while.
• Narrow pockets or narratives like privacy, fee switches, etc continue to print some isolated strength.

On a sector level, performance was uniformly negative, with every GMCI index posting sizeable weekly declines. The GMCI-30 fell 12 percent and most sectors dropped between 14 and 18 percent, led by AI, DePIN, Gaming and Memes. Even typically more resilient categories like L1s, L2s and DeFi saw broad weakness. The move was indiscriminate and reflects a full risk-off shift rather than sector rotation.

The exhibit above rolls Monday-Monday, hence discrepancy vs first exhibit

BTC is trading again at sub $100k which hadn’t happened since May this year. BTC defended the $100k level twice (Nov 4 and 7) before last week and even experienced a relief rally back to $110k early last week. However the recovery faded aggressively last week, mainly during U.S. hours (green zones below), with hourly candles showing a clear pattern of selling as soon as the U.S. came online until we finally rejected the $100k level after two previous tests.

Some of the pressure came from whales trimming exposure. Q4 to Q1 selling is usually seasonal, but this year it has been pulled forward, partly because many traders expect the four-year cycle to imply a softer year ahead. That belief becomes self-fulfilling because if participants think next year will be weak, they start derisking earlier. Combined with fading momentum, it amplified the move. Importantly, there was no real fundamental break; the pressure was U.S.-led and macro-driven.

The more plausible driver was the rate-cut repricing. After Powell walked back the idea of a December cut, U.S. traders began drilling into the individual views of the 12 FOMC members, which naturally happens in the U.S. first. As a result, U.S. desks started shading December cut odds lower, moving from roughly 70 percent toward the low 60s before the broader global market caught on. This helps explain why the heaviest pressure showed up during U.S. hours on 10 to 12 November, even while headline probabilities were still in the mid 60s. By the time the rest of the market adjusted, most of the move had already been priced in.

While the next rate cuts dictate short-term sentiment, the broader macro environment has not deteriorated. We remain in a global easing cycle: Japan is preparing a $110bn stimulus package, China continues to print, the U.S. QT program ends next month, and fiscal channels such as the proposed $2k “stimi” remain active. The shift is more about timing than direction, how quickly liquidity comes through and how long before it feeds into speculative risk. For now, crypto is trading almost entirely on macro, and without fresh data to anchor rate expectations, the market remains reactive rather than constructive.

Our take:

“Macro remains supportive and the reset in positioning leaves the market cleaner, but for sentiment to stabilize majors need to perform"

The selloff this week looked more like a macro-driven flush than a structural break. Positioning has been cleared out, the U.S.-led pressure is now well understood, and the cycle dynamics around whales and year-end flow explain much of the move. While there are some fears around the repetition of the 4-year cycle, the broader backdrop remains constructive with global easing continuing, U.S. QT ending next month, stimulus channels still active and liquidity likely improving into Q1. What is missing is confirmation from majors.

Until BTC moves back toward the top of its range, market breadth is likely to stay narrow and narratives will remain short-lived. This macro setup is very different from 2021/22 and does not resemble a prolonged bear environment. With macro driving the market, the next catalyst is more likely to come from policy and rate expectations rather than crypto-native flows, and once majors regain momentum the market should be positioned to recover more broadly.