Cryptocurrency And Macro Econ Newsletter : 4\23\2025
The hidden patterns driving Crypto Markets in 2025

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Issue #003 (April 23, 2025)

Date: April 23, 2025

Subject: Review of Key Themes and Insights from Digital Frontier Weekly - Issue #003

Executive Summary:

Digital Frontier Weekly - Issue #003 presents a strongly bullish outlook for Bitcoin (BTC) and the broader crypto market, driven primarily by a significant surge in global liquidity. Despite a lingering "DEFLATION" macro regime signal, the report highlights several key indicators pointing towards potential upside, including reduced Federal Reserve Quantitative Tightening (QT), robust net USD liquidity flows, record global liquidity levels, returning ETF inflows, and extreme levels of investor fear. The report suggests that liquidity is currently the dominant force, outweighing the negative signal from the macro regime. Tactical recommendations favor long positions in BTC and exploration of bullish options strategies, while advising patience on altcoin rotation.

Main Themes and Key Ideas:

• Dominance of Liquidity: The central theme is the overwhelming influence of increasing global and USD liquidity on the crypto market. The report emphasizes that "Liquidity lifts all boats—until it doesn’t," and currently, the tide is rising significantly.

• Quote: "Liquidity is the tide and it’s still rising."

• Liquidity Indicators are Bullish: Multiple liquidity metrics are highlighted as being at or near cycle highs.

• Fed QT Ending: Reduced QT roll-off to $5 B/wk is seen as putting a floor under dollar liquidity, scoring a +1.39 z-score.

• Net USD Liquidity (TGA + RRP flows): Treasury cash-draw and RRP bleed contribute to strong liquidity, also at a +1.39 z-score.

• CrossBorder GLI: Global liquidity reached a fresh cycle high of $176 T, scoring a +1.41 z-score.

• ETF Net Flows: A significant $580 M 5-day net inflow into Spot-BTC ETFs moved this metric from neutral to +1.00 z-score.

• Sentiment at Extreme Lows (Contrarian Bullish): Various sentiment indicators (AAII, CNN Fear-Greed, Active-Manager Exposure) are at multi-year lows, signaling extreme fear. This is viewed as a "springboard, not a cliff" and a contrarian bullish signal.

• Quote: "AAII, CNN Fear-Greed & Active-Mgr Exposure all at multi-yr lows = max fear."

• Quote: "Sentiment capitulation: Capriole’s trifecta (AAII, CNN, Active-Mgr) shows fear at 2009-level extremes—typically a springboard, not a cliff."

• Macro Regime as the Primary Risk: The 42 Macro model signaling "DEFLATION" is the only significant negative factor. While its weight in the composite score is small (7%), a flip to "INFLATION" is identified as the main event that could break the current bullish setup by hitting liquidity through higher real rates.

• Quote: "42 Macro still says “DEFLATION”: The only heavy negative, but its 7 % weight now dwarfed by liquidity positives."

• Quote: "Regime flip to INFLATION: 42 Macro model watching CPI & MOVE; would erase +0.07 weight but more importantly hit liquidity via higher real rates."

• Composite Score Reaching Cycle Highs: The overall composite score has risen to +0.62 σ, its highest reading since November, reflecting the strength of the positive signals.

• Quote: "Composite Score: +0.62 σ (was +0.45 σ) — highest reading since November."

• Tactical Levels and Strategies: Specific tactical levels for BTC and ETH are provided, along with recommendations for different trading approaches.

• BTC-USD Support: $91 K weekly close. Loss of this level voids the breakout thesis.

• BTC-USD Resistance: $100 K (range cap). A close above $100 K opens the $120 K fair-value gap.

• ETH-USD: Needs rotation catch-up, with the rollup narrative seen as a potential catalyst.

• Directional Traders: Bias long with tight risk below $91 K, pyramid into a $100 K reclaim.

• Carry/Funding: Positive funding is back, favoring delta-hedged basis trades with spreads at 4% annualised on CME.

• Options: Skew has flattened, making 90-day 25Δ calls cheap. Bullish risk-reversals targeting $120 K are recommended.

• Alts: Still beta-laggards; rotation typically begins 30-45 days after BTC pushes ATH, advising keeping dry powder.

• Potential Risks to the Setup: Beyond the macro regime flip, potential risks include the Fed reversing its QT taper and a re-escalation of tariffs.

• "Triple-Put" as a Long-Term Tailwinds: The report identifies three potential long-term policy supports: Trump, the Fed, and the Treasury.

Most Important Ideas/Facts:

• Global liquidity at a fresh cycle high of $176 T.

• Fed QT roll-off reduced to $5 B/wk.

• $580 M net inflow into Spot-BTC ETFs in 5 days.

• Sentiment indicators (AAII, CNN, Active-Mgr) at multi-year lows, indicating extreme fear.

• Composite z-score at +0.62 σ, the highest since November.

• 42 Macro model still signals "DEFLATION" as the primary macro headwind.

• Key BTC levels to watch are $91 K (support) and $100 K (resistance).

Chart Reference:

The report references a dashboard with bar charts of z-scores and the GLI curve for a visual representation of the data.

Conclusion:

The Digital Frontier Weekly - Issue #003 presents a compelling case for a bullish market outlook, heavily weighted by the strength of liquidity indicators. While acknowledging the "DEFLATION" macro signal as a key risk, the report concludes that the current environment of rising liquidity, extreme fear, and policy supports favors upside follow-through. Dips are viewed as buying opportunities until the macro regime signal changes. The report strongly encourages keeping an eye on CPI and the MOVE index for potential shifts in the macro landscape.