GM! Welcome to Milk Road PRO – your weekly dose of top-tier crypto insights that will leave you feeling like an A-List celebrity at the crypto grammys. 🏆
Something unusual is happening in the markets. 👀
Stocks are skyrocketing (orange), while crypto is plummeting (blue). Typically, crypto tends to correlate with stocks, so what's going on? 🤔
Whenever the correlation between crypto and stocks drops below -0.8 (light blue bottom indicator), crypto tends to surge soon after.
Check out the red dotted lines marking past occurrences of this trend. 👆
Here's the kicker: we're currently at a correlation of -0.84. Does this mean we’re ready for the next big move? 👀
The gap between rising stocks and falling crypto is clear. 🪟
The chart above suggests that now might be the perfect time for crypto to gain momentum. But we can never make decisions based on just one data point or chart.
Instead, let's dive deeper into this theory.
Here are the four key areas we monitor to confirm our thesis:
✅ Macro trends ✅ Crypto fundamentals ✅ Market sentiment ✅ Technical analysis
Spotting the perfect moment isn't easy, but we have high confidence that it's right now. Why?
Because we've just reached the inflection point—the moment when markets shift from bearish to bullish.
The macro environment signals a green light for investors to go risk-on, while crypto fundamentals are stronger than ever.
Combine that with market sentiment at its lowest in the past 12 months and prices finding strong technical support levels from which they have bounced back and appear to be in an uptrend.
It looks like we can finally check all four boxes. This gives us the confidence that we've finally reached the inflection point. 🤑
Let's dive into the four areas mentioned above. By the end of this report, you will:
- Clearly understand why we believe we are at the inflection point
- Know our strategies on how to take advantage of it
We are excited to share this one with you. So let's get right into it. ⤵️
MACRO TRENDS 🌐
Let's start with macro trends, as they set the stage for the markets. We've already shared the chart showing the gap between stocks and crypto.
There are two possible scenarios for closing the gap:
- Stocks will follow crypto and start to fall.
- Crypto will follow stocks and start to grow.
Crypto is likely too small and irrelevant to influence stock market trends significantly. Therefore, the latter option—crypto following stocks and starting to grow—is more viable.
We believe now is the time for the crypto trend to not only close that gap but also accelerate much higher.
But why are we confident that stocks will continue to rise? We need to consider two key questions:
- Where are we in the market cycle?
- Is new liquidity entering the market?
Let's examine the first question: Where are we in the market cycle?
The chart below shows the percentage of countries in each market cycle (season) globally.
"Summer" represents the best phase for investors. During this period of strong economic growth and prosperity, stocks and other investment instruments tend to perform exceptionally well.
Currently, 87.5% of countries are in the "Summer" phase. This means almost 9 out of 10 nations are poised for growth and prosperity.
And remember, rising stocks are typically a byproduct of flourishing economies. 🌐
The message is clear: Sitting on cash may not be wise. And allocating money now could be smart because we are at a point in the market cycle where growth is expected…
But nothing grows out of thin air, right? Even flowers need some summer sun.
Similarly, the market needs fresh liquidity to thrive and push prices higher. Think of liquidity as the fuel that drives the market. So, how do we get this new liquidity?
It's simple: by lowering rates and printing more money. Brrrrrrrr. 💸
The market generally expects the US to have 2 or 3 cuts this year. Plus, over 25% of countries have already started cutting the rates and 27 of 34 central banks expected to enter easing by year end.
The trend on the chart above is quite clear. More and more central banks start monetary easing by lowering the rates.
FED Chair Powell also stated that the U.S. economy is no longer overheated, emphasizing that the case for interest rate cuts is becoming stronger. 🚀
Additionally, here is a chart showing that when unemployment rises by more than 0.5% from its lows, the FED tends to react.
Currently, unemployment has risen by more than 0.5%. Historically, the FED has responded to such increases with rate cuts. ✂️
Of course, inflation has been the major concern preventing the FED from cutting rates. However, if you look at the chart of the US Core inflation rate, it’s clear we’re heading back towards the norm.
The combination of lowering inflation and increasing unemployment makes rate cuts inevitable, which is great news for investors as it brings new liquidity into the markets.
Here is the chart of global liquidity. We’ve added on some beautiful lines to show you where it’s heading next. 😉
Consolidation triangles from 2018-2019 and 2022-2023 indicate periods of market uncertainty about the next move. These patterns usually hint at a big change coming soon.
Everything points to the next move being upward, just as we highlighted on the chart.
Ok, great. So macro and stocks look very positive. But what does this mean for crypto?
CRYPTO FUNDAMENTALS 🚀
Uh, Oh… 😧 The rest of this report is exclusive to Milk Road PRO members!
WHAT’S LEFT INSIDE? 👀
- Why we believe we are at the inflection point
- Our strategies on how to take advantage of it
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