Introduction to Signal vs. Noise
Behind the scenes of the Signal vs. Noise blog.
Thanks for joining my new blog, Signal vs. Noise.
Same Joe Orsini, but with a new spin: more strategy, and less commentary. More objectivity, and less red tape.
The Signal Vs. Noise blog provides readers with my macro viewpoints, digital asset perspectives, and investment strategies. Here, I aim to provide “signals” in a world of headlines, sensationalism, and “noise”.
Before my first strategy note, some quick facts about myself and my research:
I come from traditional finance, particularly, investment strategy. I’ve worked directly alongside a Chief Investment Strategist of a large investment bank for five years, co-authoring weekly, monthly, quarterly, and annual investment strategy notes as the “house view.” This built my foundational understanding of multi-asset markets and investment strategy.
Within digital assets, I’ve spent 18 months at a small start-up where I provided digital asset market commentary and portfolio implementation to hundreds of financial advisors, as well as built and presented educational digital asset materials for the wealth management market.
I now aim to provide my unbiased views across macroeconomics, monetary policy, and global macro, particularly in light of digital asset markets. These views begin with the top-down assessment of macro fundamentals, narratives, sentiment, and trends, coupled with intermarket analysis, on-chain analysis, and crypto-specific focuses.
Much of my research focuses on intermarket analysis. I believe all markets are related, and what happens in one market has an impact on others. The movements and price action between these assets are truth to what’s occurring under the surface. Market pricing across various instruments often indicates whether narratives are “priced in.” Often, rotations occur with simultaneous highs and lows in relevant macro assets.
I enjoy all assets and will discuss the interconnections between these throughout the Singal vs. Noise blog. But my love for digital assets stems from the fact that bitcoin is the “most macro” asset in my lifetime. It’s speculative in nature, growing in adoption, and experiences controversy at highs and lows. Bitcoin very much remains in price discovery mode, and as a result, it responds incredibly well to the macro-environment. This is a journey I enjoy chronicling throughout the way.
The Signal vs. Noise blog utilizes traditional “intermarket analysis” of equities, bonds, commodities, and currencies to make sense of bitcoin and digital asset price movements.
While history doesn’t repeat itself, it often rhymes. I’m a believer that market history serves as a guide for today’s environments (“evidence-based research”)
I believe that sentiment follows price (the theory of reflexivity). Markets do not always reflect the underlying economy. “Known uncertainties” discussed on media outlets are often already priced in, and if so, can be found through intermarket analysis.
While I often discuss recent market events and their implications, my mind is always on the “big picture.”
NOW, WHAT TO EXPECT:
Weekly Digital Asset Strategy Notes covering price action, themes, trends, and on-chain indicators, framed in the discussion of macro markets, economics, monetary policy, and intermarket analysis
Short Thematic Essays on Key Topics and Events
Thematic and Systematic Market Strategies for bitcoin futures and spot altcoin markets
PREREQUISITE: MY EXISTING VIEWS.
MARKETS:
While many were fearful in late 2022, I was optimistic: Throughout much of the year, both yields (as a result of inflation uncertainty) and the dollar (as a result of the Fed’s hawkishness) were key “macro-overhangs” that have since alleviated. The DXY Index peaked on 9/27 at 114.19, while the 10-year yield peaked on 10/24 at 4.25%. This supported the equity rally that began after the failed breakdown on October 13th (which I believe to be the low of this cycle).
While traders took advantage of both up and down volatility, long-term investors had the opportunity to purchase both equities and digital assets through a meaningful drawdown. The Nasdaq Composite’s peak-to-trough decline reached 36.4%, while bitcoin and ether declined 76.9% and 81.2% in this cycle.
Here, bitcoin’s “market-value-to-realized-value” multiple was key with particularly attractive levels at, near, or below 1.
While many called for a long “crypto winter”, I remained positive. Bitcoin and ether held up relatively well related to the macro environment, with bitcoin outperforming in both Q1 and Q3 of the year. The event-driven declines in May (Luna/UST, 3AC), June (Celsius, Voyager, Blockfi), and November (FTX) were key culprits of the significant underperformance versus expectations. But these idiosyncratic risks are “growing pains”, and markets have a short memory.
ECONOMICS & THE FED:
While many call for a hard landing, I see a large possibility of the opposite: disinflation has occurred, the job market remains strong, and earnings have surprised to the upside. No economic collapse has occurred – many believed this would happen as they saw stock prices fall. But even so, US GDP grew 2.6% in Q3, with a first estimate of Q4 at 2.9%. At the time of writing, Atlanta Fed’s GDPnow forecasts 2.2% growth for Q1 ‘23.
While many said “the Fed will hike until something breaks”, I’ve discussed the possibility of a 5% peak Fed funds rate for quite some time. This is because Fed Fund futures have priced this in since mid-October - the bond market did not respond to the hawkish “higher for longer” Fedspeak throughout early Q4.
As I’ve pointed out, historically, the bond market “bullies” the Fed (most recently, in 2018/2019). As we know, the 2yr treasury is often “where the Fed is going.”
I believe the Fed has so far successfully navigated the process of normalization, not without the usual scrutiny and doubt experienced throughout hiking cycles. Now, while the market hopes for a cut by the end of the year, I believe one can come as a result of disinflation (or even, deflation). A cut from an economic collapse is always a possibility, but not a good sign if it occurs. I remain heavily in the soft-landing camp and believe the Fed will reach the 5.0% upper bound and remain data-dependent from there.
As a result of the aforementioned views, I believe markets will surprise to the upside in both digital assets and equities, with a resilient economy and both a decline in Fed uncertainty and market volatility. In hindsight, inflation may, in fact, have been “transitory.” Only time will tell.
I believe historically low global interest rates are here to stay, with ubiquitous technology, robotics on the factory floor, and algorithms in the workplace as secular tailwinds pushing deflation going forward. Low-interest rates support appetite further out on the risk curve - particularly, digital assets. :)
