Oct 6, 2023

Bitcoin (BTC)'s price is retreating slightly Friday, hovering around $27,500 after 336,000 jobs were added last month in the U.S. MarketVector Indexes digital asset product strategist Martin Leinweber discusses his crypto markets analysis, along with insights into the sector's performance since September and outlook on large cap tokens.

Video transcript

The September Jobs report is also is out today, 336,000 jobs added last month. That's double what was expected. The unemployment rate was unchanged at 3.8% but it's not happy for everybody. Crypto wallet maker Ledger is laying off 12 percent of its staff. The CEO said it's due to macroeconomic headwinds limiting their ability to generate revenue. So what does this all mean for crypto joining us now to discuss the markets is digital asset product strategist for market vector index indexes Martin Leinweber. Welcome back, Martin. Good morning. Thank you for having me. Glad to see you again. So we have this jobs report out. Uh it double what we're expecting for new jobs. That of course, gives a little bit of room to the fed to raise interest rates. Yet again, another 25 basis points potentially by the end of the year, the crypto markets barely reacted. What's your expectation? Now, that risk has gotten more expensive? Well, it really depends on where you're looking at, right. So the big eye catcher here is I think really, uh Bitcoin and crypto and in general, because if I look at the dollar index. Yeah, it's, it's up so the dollar is going higher. That's not good for risk assets. The dollar yen is up, 10 years are at 4.83%. 30 years is around 5%. Um, so traditional assets are reacting as expected. What surprise you to me is and what's encouraging is that uh Bitcoin is so stable and you see that for a while. So if you look at uh cross correlations of Bitcoin, for example, with bonds with equities, with commodities, et cetera, it's around zero at the moment. Yeah, if you remember uh last year, everybody was complaining about a super high correlation with the NASDAQ and now it's, it's around zero. Now um correlations are always passing doesn't mean that it stays there forever. But um it seems to me really that um yeah, the weak hands are hot in crypto and just the diehard believers are in. And so it's not trading as a macro asset at the moment. That's eye catching. Yeah, I I but within that, if we were to break down crypto in general, not just Bitcoin, but if we were just to look at crypto in general, you, you see some winners and losers over the past month. Uh II I think we're looking at infrastructure particularly doing uh relatively well uh compared to other sectors. Can you break it down for us a little bit more? We have a chart, I think up here Yeah, so I don't see the chart. I'm here on, on my mobile phone. Five G. So um but I think I know what you are referring to and now I see it. Yeah. So um what we see here are the, the different crypto sectors, you know, you can split up uh the crypto universe in different sectors similar to what you have in a Yeah, so you have uh the green line is a Bitcoin here. The orange lines uh smart contracts, uh the gray line uh uh infrastructure token. So infrastructure applications and you see a huge diversion. Yeah, between the losers which are media and entertainment. The winners which are the so-called uh decentralized computing token, decentralized GP U uh decentralized storage token which are benefiting from this overall A I hype. So you see um the performance here for September. Uh if you had a longer time series, you see that this is a longer narrative forming at the moment. Um And it was up for September while NVIDIA and the the stocks, the I stocks were were down. That's also interesting. But I think it's encouraging also to see that we have a dispersion here. Yeah. And I think that's always important if investors are looking at the market that they make a difference between the different tokens and not just look at Bitcoin, you also note that since the March banking crisis, large cap tokens have taken the lead in performance. Talk to us about this. What's the significance here? Yes. So as you see here, what I've done here is I did a relationship between our large cap index which consists of the 20 largest token and coins and the small cap index which is the bottom half of the, of the top 100 universe. And whenever this ratio is going up, that means that large cap tokens are performing. And that's a theme we see since this year, since, since the new bull market has established. And especially if you look at the time scale, you see since the mini banking crisis we had, it's all about Bitcoin, but also about Ethereum. And generally speaking about the larger token that's also related to the liquidity, liquidity is pretty poor. We have less market makers in the system. And so a lot of investors are focusing on the larger cap token. And that means that we are really early in this bottoming phase or bull market. What you normally see is if it really gets to a strong bull market, then the small cap tokens take the lead. So you have a rotation from the larger cap tokens to the smaller ones. We don't see that yet. I think that's more of a story for next year. I mean it it, you know, a couple of years ago, I was looking at this at at at the the relatively at the relative ratio of of small caps, large caps that look like small caps were, were the place to be that has since changed. Uh Do you think that this is sort of a shaking out if you will of the smaller caps that people, the investors have gotten? I don't want to say harder, but they, they're kind of not as interested anymore about these also rans the, the so-called Ethereum killers that everyone's saying, you know, we, we kind of know where this is going. Let's not bother with these penny stocks. If you will of crypto, the small caps, is that also possible? In other words, that that line could just keep going up. Yeah, it could be, I mean, there's momentum in it. We see that, but I wouldn't say it's due to more sophisticated investors. I think it's more an indication of where we are in the cycle. So I really expect that if we get the strong bull market back that people will flock to the smaller tokens again, they are, they are more gamblers than in the market. It's just a reflection of that at the moment, there's not a lot of things going on. If you are honest, if you look at unchained fundamentals, if you look at fees generated on Ethereum, um if you look at active users on different platforms, um those figures are lower than three months or six months ago. And so it's really an indication for me that we are early in this maybe new bull market bottoming phase. And if we get more speculation back then for sure, the small caps will outperform again. What do you think the catalyst is gonna be for the next bull run? I think it's not a, it's not a secret, right? So everybody is focused on the spot, Bitcoin ETF. And I think there are a lot of indications that we will get that next year in Q one. And although people are disappointed about the recent Ethereum futures. ETF, I have to highlight that these are two different products. Not only one is focused on Bitcoin and the other on Ethereum, but the one is as of today, the Ethereum one is a futures TPF that's more trading oriented. Um I think the spot Bitcoin ETF really is the game changer for the all the advisor in the US which make up I think $30 trillion in assets under management. And I think that could be the trigger for more bullishness and then you have the halving cycle. Um And maybe, yeah, if we have more risk and more stress in the system, a effect which is more accommodative again, and then you have the perfect playbook for a new bull market again. Martin, thanks so much for joining us this morning and have a great weekend. You too. Thank you very much. That was Digital Asset product Strategist for Market vector indexes Martin line Weber.

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