Thread by @tedtalksmacro

/1 My thoughts on how I'm looking to play this current market environment.

Now isn't the time to make it all back in one trade, but I believe that if you can give yourself long enough time horizon, you'll have had success.

2023 and 2024 will be good to you, if you let it.

/2 The opportunity in the crypto space is abundant and I believe it will continue to be that way into the future, flushing out the over-leveraged and the bad actors is net positive for crypto - which is what has occurred these past few days.

/3 The macro headwinds present right now (inflation, tightening of central bank policy) are blowing the hardest that they ever have done in the crypto market's short history.

And this time, macro really does matter (where it may not have in the past)

https://twitter.com/tedtalksmacro/status/1483287063365619722?s=20

/4 Today's global market environment is vastly different from 2021 for a few key reasons...

- Commencing in June, liquidity will be pulled out by the US central bank at a rate of up to $2.2M USD per minute (where is the liquidity for the next leg higher?)

https://twitter.com/tedtalksmacro/status/1522413399560560641?s=20

/5 - Inflation continues to run over and above the Feds target level, today's print confirms that inflation is outpacing consensus... it won't be until inflation consistently falls over a long enough period that the Fed can take their foot off of the tightening pedal.

/6 Given that 'price stability' is the Feds mandate, they won't stop until its achieved - they are sacrificing stocks to save the bond market, which has been destroyed since the COVID-19 outbreak.

Higher yields are notoriously bearish for equities.

https://twitter.com/tedtalksmacro/status/1524315376607133696?s=20

/7 And what has a strong correlation to equities? #Bitcoin and the crypto market.

It won't be until the US10y and co. find a macro-top that US equities bottom and naturally BTC and crypto bottom too - Given the strong correlation.

/8 Crypto has entered a phase of capitulation, which is often followed by weeks and even months of re-accumulation for the next leg higher.

/9 Think of what happened post May 2021 - months of sideways action, and that was in an environment where the Fed were providing liquidity to the market!!!

/10 So you can only imagine how difficult it will be for crypto in an environment with reduced liquidity, to pull off the bounce that it did in mid-late 2021.

/11 All in all, that paints a fairly bleak picture for crypto in the short-term.

For a 'macro' bottom to occur in crypto I believe that the TL;DR is:

- Treasury yields to top out
- Equities bottom
- Crypto bottoms as a correlated asset to equities

/12 Yields will peak, when the market is content that inflation has peaked, and that will not come after one month of lower CPI data.

I think that it is more likely to take a whole quarter of data to reassure the market that inflation is not so much a worry any longer.

/13 What to do in the meantime?

If you're a long only crypto type of trader, you're going to have to be quick. This is a trader's market and playing level to level is the only way to stay alive.

/14 Forget breakout trading on the long side, intra-day trading established ranges is your best bet for now imho.

/15 deFi still offers opportunity although much smaller than previously. With APR deteriorating across the board, 5-10% on stablecoins is AMAZING and this is how I'll be looking to allocate the majority of my portfolio until it is clear that the Fed see inflation differently.

/16 Lending USD on reputable CEXs and a small allocation to larger liquidity pools in deFi (while the sideways range plays out) is much higher EV than what trading directionally will likely be in coming months (unless you're willing to scalp staring at screens for 10+ hours/day)

/17 Leveraged yield farming is another way to make solid returns in such an environment, but is the higher risk out of simple lending and LP.

LYF requires constant attention and hedging to ensure that your position remains profitable.

/18 TL;DR

A combination of lending USD, Liquidity provision in deFi and leveraged yield farming can potentially net solid returns over the coming months while the market trades sideways/lower as the Fed pull liquidity at a rapid rate.

/19 While the masses get rekt trading a downward trending range. I'll be allocating to lending, LP and LYF with the odd intra-day scalps.

/20 When it is more clear that inflation is beginning to peak, I'll then get into longs on the blue chips - $SOL, $ETH, #BTC being my main targets.

/21 While I wait for that to occur, I'm completely content with earning 5-10% APR on my overall portfolio... brighter days are to come my friends. Stay hungry, stay patient.