Fed threatening rate hikes while billions flee Bitcoin — short the crypto laggar
Thesis
Bitcoin is clinging to support near $60,000 primarily because investors are terrified of the Federal Reserve raising interest rates. With the new Fed chief, Kevin Warsh, explicitly stating that policymakers will decide on a rate hike at the next meeting, borrowing costs are likely to stay high, pushing investors away from risky assets like crypto. This fear is evidenced by a record $4.5 billion being pulled from Bitcoin ETFs in June. As a direct result, Strategy (formerly MicroStrategy), a company heavily exposed to Bitcoin, has lost 41% of its value and is heading for its eleventh down month. Combining Warsh's rate hike threats with the massive ETF bleeding makes a strong case for a continued downward spiral in Bitcoin proxies.
Strategy approach
Build a mean-reversion / momentum strategy that enters short MSTR on D1 when BTC-USD closes below its 50-day moving average and MSTR closes below its 20-day moving average. Exit when BTC-USD closes above its 20-day moving average. Apply a strict 8% stop loss and a 21-day max holding period.