Weekly Market Update: FOMC Week
1. Regime Snapshot
- Macro Regime: Late-cycle, policy-constrained
- Liquidity State: Flat → contracting (global)
- Policy Bias: Hold, mildly restrictive
- Volatility Character: Suppressed but unstable
- Risk Asymmetry: Skewed downside for crypto, late-cycle upside risk for equities
Verdict:
This remains a bearish-leaning macro regime for crypto. Recent strength across equities and metals is being driven by FX-led USD weakness, not genuine liquidity expansion. Until liquidity confirms, crypto caution remains warranted.
2. Macro Context: Midterms Year With a Nuance
Historically, the US midterms year has been bearish for Bitcoin and crypto, a pattern visible across prior cycles going back to 2013. This year is already tracking in line with that tendency.
However, this cycle carries an important nuance:
Prior midterms years typically occurred during:
- Transitions from ultra-low rates into hiking cycles
- Active QT and contracting net liquidity
This time:
- Rates remain high, but the hiking phase has ended
- Initial cuts occurred last year, with 1–2 more potentially ahead
- QT is ending and the Fed balance sheet is flattening, not accelerating lower
This does not invalidate the bearish framework — but it softens it. At minimum, this raises the probability of a more complex, range-bound bear rather than a straight liquidation phase.
3. FOMC Setup & Policy Expectations
- FOMC outcome: Pause is fully expected
Rates pricing:
- Two cuts priced for 2026
- First cut anticipated around July
Rates market behavior:
- No stress signals
- No urgency priced
- Front-end yields remain range-bound
Interpretation:
Policy is no longer tightening, but it is also not easing aggressively. This is not a pre-pivot environment.
4. Liquidity Reality Check (Key Constraint)
- Fed balance sheet: Flat last week following a minor decline prior
- TGA: Refilled aggressively, moving back toward ~$900B
US net liquidity:
- Flat at best
- No TGA-driven tailwind
Global liquidity:
- Most major central banks remain in balance sheet contraction
Conclusion:
There is no convincing, durable liquidity bid supporting risk assets. Any strength occurring here is not liquidity-led, which is critical when assessing sustainability.
5. Cross-Asset Signals & Divergences
USD & FX
DXY:
- Clean breakdown below May 2025 range lows
- ~-4% over the past two weeks
USDJPY:
- ~-4% decline
- No volume capitulation → suggests orderly carry unwind, not panic
This USD weakness appears FX-driven, likely tied to Japan-related tightening expectations rather than US easing. This distinction matters.
Bonds & Real Yields
- 2Y yields: Still range-bound at the lows
- Real yields: Elevated and stable
Rates markets are not confirming a liquidity or policy shift. This divergence with USD weakness is notable.
Commodities
Gold & Silver:
- Continued parabolic advances
- Clear beneficiaries of USD weakness
Oil:
- Bullish internal structure
- ~+13% since pivot
- Early trend, but inflation-relevant if sustained
This looks like late-cycle capital rotation, not growth optimism.
Equities
- DJI: Bullish daily and weekly, consolidating near highs
- SPX: Testing ATHs
- NDX: Bullish after daily sweep, forming a potential ascending triangle near ATHs
- RTY: Bullish daily and weekly, shallow pullback in price discovery
- NIKKEI: Similar bullish consolidation
Equities remain strong structurally, but increasingly detached from liquidity fundamentals — a pattern typically associated with late-cycle conditions.
6. Bitcoin: Structure & Regime
Weekly
- Weekly structure: Bearish
- Weekly bands: Confirmed bearish
Positioning:
-
Below weekly bands
-
Below weekly sell-side FVG
-
Q1: Inside bar → compression, not resolution
-
December highs: Potential sweep developing, not confirmed until January close
Bitcoin remains firmly bearish on the weekly. Strength below bands and below the weekly sell-side gap is counter-trend by definition.
Daily
- Primary structure: Bearish
- Environment: Range with a complex pullback
November low:
- Notable capitulation-style volume
- Suggestive of stress, not resolution
Invalidation & Pivot Zones
To flip weekly bias bullish, the following must occur:
- Reclaim weekly bands
- Reclaim weekly sell-side FVG
- Hold above the monthly gap (~103k)
- Weekly bands flip green
Until then, bear-market rules apply.
The monthly gap (~103k) is the regime pivot:
- Failure → confirms a macro lower high and sets up a major short
- Reclaim → invalidates the bearish thesis and opens a path back toward ATHs
Bear Market Continuation Scenario
If Bitcoin follows historical bear-market structure:
- Expect a monthly C-wave
- Final capitulation leg likely targets the 3-month gap (~70–76k)
Intermarket Warnings
- COIN vs BTC divergence: Persistent and historically bearish
Stablecoin dominance:
- Weekly bands still bullish
- Testing support
- Continuation higher historically aligns with deeper bear phases
7. Resolving the Core Question
Is this equity cycle exhaustion — or a BTC catch-up trade?
Base Case (Highest Probability)
- USD weakness is FX-driven, not liquidity-driven
- Equities are in late-cycle consolidation, not early expansion
- Bitcoin is correctly signaling liquidity constraint
→ BTC continues to lag; risk of equity exhaustion rises.
Conditional Bull Case
Requires evidence:
- Balance sheet expansion
- Clear policy shift
- Net liquidity inflection
If triggered, BTC likely catches up aggressively.
Bearish Escalation
- USD stabilizes or rebounds
- BoJ tightening accelerates carry unwind
- Oil feeds inflation concerns
→ Equities roll; BTC breaks lower.
8. Forward Guidance (Execution Lens)
Lean Into:
- Discipline
- Relative strength awareness
- Treat FX-driven moves as temporary until liquidity confirms
Avoid:
- Chasing BTC on USD weakness alone
- Assuming equities confirm easing
- Front-running pivots without balance-sheet evidence
What Changes the View:
- Sustained net liquidity expansion
- Balance-sheet growth
- Rate-market repricing
- Weekly BTC structure reversal
Weekly Posture
Risk assets are levitating on USD weakness, not liquidity expansion — until liquidity confirms, Bitcoin's caution remains the more honest signal.
