There’s Only ONE Thing This Market Cares About …
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| By Juan Villaverde |
The fog of war already hangs so thick over the Middle East, it’s hard to know what is really happening on the ground.
Nonetheless, one thing is abundantly clear: Markets are marching to the beat of this conflict.
That includes crypto.
And nothing else seems to matter.
In fact, suppose you missed the first missile strike on Feb. 28.
You would look at this chart (below) and draw exactly that conclusion.
That nothing matters … but the war.
A Most Unusual Correlation
The chart goes back to March 3, so it covers the last week. You can see both time series trading in lockstep. Whatever oil does, Bitcoin (BTC, “B+”) does the opposite.
In other words, oil up = Bitcoin down.
And it’s not just Bitcoin …
Another Most Unusual Correlation: Oil versus SPX
Here, you see the S&P 500 versus oil. Same conclusion.
Below are all three:
BTC’s Correlation Moment versus Oil & Stocks
This is what analysts call a "correlation 1 moment." This may sound a bit technical.
But all it means is that there are periods when everything trades together. Dancing to the tune of whatever monopolizes the attention of every trader and investor on the planet.
That's what the Iran War is, right now.
In fact, over the past few days, I haven't even looked at my crypto charts. Only two things matter: the price of oil, and news that could affect it.
As such, if you want to understand what happens over the next week or two, this is all that matters.
Speaking of which, as the U.S. and Israel trade punches with Iran, two things have become crystal clear:
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Markets care only about oil flows. Last week the Iranians said they'd close the Strait of Hormuz, through which most of Asia's oil flows. Oil surged. Risk assets like crypto tanked.
Then President Trump said the U.S. Navy would patrol the strait. Oil sold off. Risk assets like crypto surged.
Then it became clear there is no realistic way for the United States or its allies to effectively force the strait open. Oil rallied. Risk assets like crypto sold off.
It is clear this narrow 30-kilometer corridor is the difference between what markets see as a regional conflict and a global one.
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Trump is looking for a way out. Calls for a ceasefire, emergency measures to keep the price of oil down domestically and comments claiming the war would "end soon" all point to this.
Trump is a dealmaker. The U.S. attack was meant to be short-lived, designed to force the mullahs to the negotiating table.
Whether this is achievable remains unclear. But it is worth watching. Because an off-ramp from armed hostilities is required for markets to breathe a sigh of relief and realign with our macro models.
Speaking of crypto specifically, I am encouraged that Bitcoin is actually UP since the conflict started.
It was trading near $65,000 on Feb. 27. Now, it’s trying to cross above $70,000 after testing $74,000 last week.
The only thing that explains this relative strength is the benign liquidity backdrop — against which this conflict is playing out.
As I noted last week: Bitcoin wants to rally. But it won't as long as the fate of the world economy hangs in the balance.
Will it crash? Unlikely.
Trading volumes have collapsed, and I am seeing intraday gaps in altcoin charts. Which means the market has been so beaten down that there are no sellers left to push prices lower.
And yet the confidence required to attract the buyers that would push prices higher — as suggested by all my macro models — is notoriously absent.
For now, crypto markets are a passive bystander in this conflict.
They’re trading in lockstep. And as headlines oscillate from negative to positive to negative, markets whipsaw about, unable to find direction.
That could change over the next few weeks if cooler heads prevail.
But until then, crypto and global markets generally are likely going to stay stuck in no-man’s-land.
As I see it, there are two ways you can play this.
First is to use this market quiet to load up on your favorite cryptos. But, as our tech expert Jurica Dujmovic pointed out yesterday, which cryptos will surge in the coming rally may be different than in past cycles.
That’s why I’ve already adjusted our approach in my Weiss Crypto Investor strategy. To see how, and when my Crypto Timing Model says it is the best time to hop in, click here.
Second is to target traditional safe havens. Outside of Bitcoin, that means gold.
Gold ETFs, like the iShares Gold Trust (IAU) are one solid approach. You can even hold exposure to gold in your crypto wallet through the PAX Gold (PAXG) stablecoin.
Or you can turn to an off-market resource play.
My colleague Chris Graebe is a private-investment expert. And he’s found a pre-IPO company that offers a backdoor way to play gold, silver, copper and other “rare earth” metals and minerals that are in short supply.
Not only is this startup’s first facility already operational …
But its process is 10x faster … and requires up to 70x less capital expenditure … than traditional mining.
Not only does this company “mine” precious metals quickly and cost-effectively …
But Chris says he wouldn’t be surprised if this company IPOs in the not-too-distant future.
He dives deep into this timely pre-IPO opportunity in his latest briefing here. But this video goes offline TONIGHT.
So, I suggest you watch it now before he takes it down.
Best,
Juan Villaverde
