GM. This is Milk Road, the crypto newsletter that once a week switches from talking about things like where to find the next Bike Tyson to dishing out streamlined macro alpha.
Hereβs what weβve got for you today:
- βοΈ Hold on to your butts.
- βοΈ What does this m ean for crypto?
- ποΈ The Milk Road Show: Raoul Pal: This Is the Setup Investors Wait Decades For.
- πͺ In-kind redemptions and voting rights are coming for tokenized stocks on Robinhood.
Nexo is a premier digital asset platform that helps clients build, manage, and preserve their wealth. Get started with Nexo today.
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HOLD ON TO YOUR BUTTS
This weekβs Fed FOMC rate decision was expected to be the "fulcrum" that the markets would hinge on.
A hold would continue momentum, a hike would slow momentum.
Instead, that market momentum was shut down on Monday before the Fed moved at all.
Dario Amodei's AI capability essay triggered a semiconductor-led rout that pushed market momentum from -0.48 to -0.61 and drove the headline allocation posture from -0.74 to -0.86.
The posture is now firmly in RISK OFF, and not just barely through the line.
The 0.36 gap to get back to RISK ON and the 0.12 gap back to CAUTION are both wider than anything a single session of stabilization can close.
The economy and the market pillars are notably pulling against each other.
The market pillar has deteriorated sharply, with financial conditions collapsing from +0.20 to +0.07 as the VIX jumped and growth impulses slid to -0.69. Copper weakness and the persistent Strait of Hormuz freight disruption also contributed to the drop on the market side.
Meanwhile, the economy pillar's macro buffer holds full at +0.50, and stress stays benign at +0.06 because the framework's inflation direction measure is still negative over six months even as each monthly print runs hot.
I know that sounds confusing, but thatβs where we are with inflation these days.
With hike odds now above 85%, up from roughly 56% ten days ago, the September 16 announcement no longer determines whether the Milk Road Macro Index slips into RISK OFF, but it might help determine how deep into RISK OFF the index goes and how long it stays there.
A hold with credible forward guidance is the minimum condition to arrest the breadth and financial conditions decay and begin rebuilding toward CAUTION.
A hike into a GDPNow reading of +1.17% would push both breadth and financial conditions lower with no cushion remaining.
If a third consecutive 0.3% monthly core Consumer Price Index print follows in October, the six-month inflation direction would finally start turning upward, which would not be good.
That sequence could drag stress off the floor and erode the economy pillar's only remaining support for the posture.
ONE ACCOUNT FOR ALL YOUR CRYPTO NEEDS
Crypto is still a weirdly fragmented experience.
One app to buy. Another to earn yield. A third to borrow against your stack.
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Here's what makes them worth trusting:
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WHAT DOES THIS MEAN FOR CRYPTO?
Well, it depends.
You could take some risk off the table and watch for a pullback. It seems like we might be heading into a period where the market is weak and waiting. Thereβs so much uncertainty right now. The Fed. The Iran conflict. The midterms. The Clarity Act.
I think it makes sense to get defensive and get into CASH.
However, personally, I think that a lot of these things are short-term headwinds that may or may not actually hold the market down for a bit.
The longer term view on the market and on crypto specifically, I think, looks very strong. My strategy for the moment is going to just be to HODL through all of this noise. I might have to stomach some volatility. I might miss some dips.
But I think the overall bear market lows for crypto are behind us now, and my bias is that eventually these macro factors will pass, and the bull market will come back to crypto.
If you want to see exactly how Iβm positioned, you can join Milk Road PRO today for just a buck.
That said, the way I play this does not have to be the way that you play it.
Come up with a strategy that makes sense for you and your capital.
And in the meantime, stay safe, stay educated, and stay bullish.
LISTEN TO THIS MAN ποΈ
I want to give you a heads up that todayβs podcast is with the legendary Raoul Pal of Real Vision.
We spent almost an hour talking about why crypto has struggled this year, what needs to happen for it to finally move, and why he thinks crypto will become the financial infrastructure for the entire AI economy.
After I interviewed Raoul, I actually sat down with LG and Kyle to record a bonus episode of Milk Road PRO After Hours, to give my personal thoughts on Raoul's investment thesis and how investors could express that in their portfolios.
Especially on a day like today, where the market is a major decision point, I think it's important to take a long term view. You can see that right here for just $1.
BITE-SIZED COOKIES FOR THE ROAD πͺ
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In-kind redemptions and voting rights are coming for tokenized stocks on Robinhood.
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Balancer: One of the OG Ethereum AMMβs is winding down.
*this is sponsored content.
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