Sometimes, investor sentiment is right, and it beats out the best of analysts. At other times, it's reacting to news items that will have no impact on the market or a muted and delayed impact.
The flurry of coverage Trump has inspired, especially surrounding his tariffs, has frightened retail traders. But as Matt Hougan (CEO of Bitwise) has noted, institutional investors couldn't be more bullish.
Retail appears to be too fearful in the short term. Let's look at some data to find out.
1 Crypto Fear and Greed
It is unusual during a bull market for the Coin Market Cap Fear and Greed index to drop into the "fear" zone (below 40).
The last time it reached these levels, $BTC was, in fact, trading below its 200-day moving average. Of course, we have witnessed one of the most uneven rallies in history, with $BTC outperforming while virtually everything else lagging (notably not $SOL, which is the new meme coin casino).
2 Bitcoin Fear and Greed
But that hypothesis, that the fear is a result only of alt-coin bleeding, isn't true. Alternative.me's $BTC
exclusive fear and greed index registers that $BTC traders themselves are fearful.
The pessimism in the market affects all coins, even the king of value storage.
3 Trump's Tariffs to Blame
Everyone seems to agree that it's Trump's talk about tariffs that are to blame. The argument is that no matter how good the economy is at the moment, or how good you would expect it to be, tariffs are inflationary.
And we remember 2022. The crypto market has a 4-year memory, and that year resides in the collective unconscious like a trauma (so to speak).
Oh, and Trump just won't shut up about his tariff talk. And this freaks the market out every time.
4 So Much Sound and Fury Signifying Nothing?
Yet, Trump has also walked back every single tariff threat to some degree. He is extremely conscious of the impact his statements have on the market and he wants that to perform well.
This means that his tariff talk is, to quote Macbeth, so much "sound and fury, signifying nothing." It is to be ignored. Just look at the macroeconomy itself.
5 A Game Plan?
The current narrative is a Tariff & Fear narrative. It runs: Trump is going to tariff the world, cratering global economies, so that he and his cronies can profit on the decline and scoop things up on the cheap.
Except that Trump himself has no means to short the real estate he owns, and while he could try to buy things on the cheap, a recession would fracture the thin majorities the Republicans presently enjoy.
If that doesn't happen, what else will happen?
6 The Three Narrative Rule
The crypto market has a 3 Narratives Rule (roughly), meaning that it can only remember 3 narratives. The previous two narratives (prior to Trump concerns) were:
Agentive AI + the Maurad meme coin narrative
And on bounce-back days, we tend to see coins such as ai16z ($ai16z), Cookie ($Cookie), and SPX6900 ($SPX) do the best.
7 Concluding Thoughts
I'm not saying that the market will start a meteoric rise today or tomorrow. It does look likely, however, that it is short term too pessimistic.
If you wish, you could start accumulating a few coins in narratives that did well just before the current Trump Tarrif narrative. Given the backdrop of a strong economy, those might do well. Personally, I like the Virtuals "AI Influencer" $Luna as a long shot.
Remember, Trump is unpredictable, so this is not financial advice. Also, DYOR for your own coins.
Happy Trading!
-Sebastian Purcell, PhD
👉Join our Trading Community’s newsletter!👈
Finally, if you learned something, give us a THUMBS UP 👍
Disclaimers and Disclosures
This post is provided for educational and entertainment purposes only and should not be relied upon for business, investment, taxation, or legal advice. You should consult your own advisors for those matters. References to any securities or digital assets are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Furthermore, this content is not directed at nor intended for use by any investors or prospective investors, and may not under any circumstances be relied upon when making a decision to invest in any fund managed by 1.2 Capital Management. (An offering to invest in a 1.2 Capital Management fund will be made only by the private placement memorandum, subscription agreement, and other relevant documentation--all of which should be read in their entirety.) Any investments or portfolio companies mentioned, referred to, or described are not representative of all investments in vehicles managed by 1.2 Capital Management, and there can be no assurance that the investments will be profitable or that other investments made in the future will have similar characteristics or results.
The views expressed here are those of the individual author and are not the views of 1.2 Capital Management, 1.2 Labs, or their affiliates. Certain information contained herein has been obtained from third-party sources. While taken from sources believed to be reliable, 1.2 Labs and affiliates have not independently verified such information and make no representations about the enduring accuracy of the information or its appropriateness for a given situation.
Finally, as the author of this report, you should recognize that I do actively invest. Many of my trades are quick and I do write about many investment items, whether stocks, digital assets, collectibles, and the like which I do not own. For the purposes of disclosing any conflicts of interest, assume that if it is covered, I own the investment item. Or if my coverage is negative that I am short the investment item.
