The “Everything Rally” & Shifting Macro Tailwinds

Below is a write-up by Kevin Kelly, Co-Founder & Chief Market Strategist at Delphi Digital, an independent research boutique providing institutional-grade research on the digital asset market. He shares some of the key takeaways from the team’s latest Macro Outlook report examining this year’s rally across asset classes and the shifting macro backdrop for Bitcoin. Disclosure: I currently sit on Delphi’s board of directors.

The "Everything Rally" aptly summarizes much of this year's above-average returns for most conventional asset classes; developed and emerging market equities, long-dated Treasuries, U.S. investment-grade and high yield corporate bonds, oil and even gold have all posted double digit percentage gains this year. Of course, we can’t forget about bitcoin, which, despite its +45% drawdown since late June, still boasts one of the best 2019 returns of any asset globally. But why have so many asset classes run up this year and how sustainable can this “everything rally” really be?

Central Bank Pivot 

For starters, this year’s turnaround coincided with a drastic shift in rhetoric among major central banks. Rewind the clock a year and the macro backdrop was radically different. The Federal Reserve was about to hike its benchmark interest rate another 25 bps, marking its 9th rate increase in just three years. The European Central Bank (ECB) had just confirmed the discontinuation of its vast asset purchase program. Even leaders of the Bank of Japan (BoJ) were hinting at the potential reversal towards tighter policy following an extensive period of massive monetary stimulus.

Despite central bankers’ best efforts, the seemingly global shift towards more restrictive monetary policy caused havoc in the financial markets. The mere threat of higher interest rates coupled with the end of massive asset purchase programs was enough to send asset prices into a tailspin; the S&P 500, for example, was down over 10% on the year through Christmas Eve last year. We’ve noted before how sizable corrections in bitcoin often coincide (or in some cases even lead) spikes in equity market volatility, and the Q4 2018 BTC bloodbath was no exception.

BTC (Orange) vs. 14-Week Moving Average of VIX Index (Inverted)

Fast forward to early 2019 and the pendulum of monetary policy was already beginning to swing the other way. Escalating trade disputes between the U.S. and China were starting to threaten global economic activity at the same time geopolitical tensions were heating up. As a result, the Fed (and other major central banks) walked back their hawkish commentary, citing the economic slowdown and below-target inflation as key catalysts for what became known informally as the “Powell Pivot.”

The reversal towards more accommodative policies sparked greater demand for precious metals, most notably gold, which are often viewed as hedges against fiat currency devaluation or inflation. Growing concerns over the “synchronized global slowdown”, heightened geopolitical tensions (driven by more frequent populist uprisings), and the swift rise in negative yielding debt instruments added further fuel to the trade as investors flocked to safe haven assets.

Bitcoin, arguably the most levered asset to broad-based currency devaluation and increased demand for an apolitical store of value, was on the forefront of this summer’s run up, inspiring many crypto enthusiasts to take to the streets proclaiming Satoshi’s good word. After all, this was the moment we’d all been waiting for – the moment bitcoin would finally break into the mainstream and claim the throne as the ultimate store of value for the digital age.

BTC (Orange) vs. Inverted 2-Year U.S. (Green) & German (Blue) Government Bond Yields

Shifting Macro Tailwinds

The amplified enthusiasm for bitcoin seemed to wash back out as quickly as it came in as the “digital gold” narrative faded with the summer sun. However, a few parallels can be drawn between bitcoin's latest drawdown and the pullback in gold prices given both face similar headwinds, the back up in real yields being one of the most notable. The outlook for the global economy has improved modestly the last couple months as key economic indicators like manufacturing PMIs show signs of bottoming. The subsequent decline in total debt carrying negative yields also marks a turnaround in one of this year’s macro drivers supporting bitcoin and gold.

BTC (Orange) vs. U.S. 10-Year Treasury Real Yield (Inverse)

Source: U.S. Treasury Department

Additionally, the Fed has shifted to a more neutral stance, putting a hold on further rate cuts for the time being. The probability of another Fed rate cut at this week’s final FOMC meeting of the year is zero, according to data tracked by CME.

BTC vs. Probability of Fed Funds Rate (Dec.’19 & Jun.’20 FOMC Meetings)

Source: CME

Interestingly, the demand for gold has remained vibrant despite its recent price consolidation, evident in the record high AUM for gold-backed ETFs and the continued accumulation of gold reserves among global central banks. Despite the Fed’s recent shift, several other major central banks have also continued to push forward with more accommodative policies. For example, the ECB recently reinstated its asset purchase program (despite signs of discord between its members over the future path of monetary policy) while the People’s Bank of China (PBOC) has proven its willingness to intervene if economic growth decelerates faster than desired.

Where Do We Go From Here?

The “Everything Rally” has benefited a lot of investors, but the risk-reward trade-off for many assets is not nearly as favorable today as it was just a few years ago. Near record-low bond yields and above-average equity market valuations indicate lower future returns and greater asymmetric risk to the downside for several asset classes, which is why we believe a small allocation to BTC is warranted at current levels.

The backdrop remains favorable for bitcoin, especially over longer time horizons, but in our view it’s important to understand how various macro tailwinds can shift. Improved growth prospects aided the latest move higher in real yields, which tends to hurt non-income producing assets like gold. However, the potential policy divergence between the Fed and other major peers may cause the U.S. dollar to break higher, especially if we see another surge in demand for “safe” assets, which could accelerate economic weakness (the greenback’s recovery following its 2017 sell-off has coincided with the narrative shift away from “synchronized global growth” to one more characterized by a “synchronized global slowdown”). Moreover, the economic outlook remains muddled at best, especially given elevated uncertainty around global trade and rising political tensions, so we don’t expect demand for non-sovereign, scarce assets to fade much going forward.

If you’re interested in reading our latest Macro Outlook report in full, please visit our website or email us at You can also find us on Twitter. We’re always looking to connect with those who share our passion for crypto and investing!


Bakkt Goes Live With Options, Cash-Settled Futures Products: Barely three months after launching its long-anticipated physically settled bitcoin futures product, the Intercontinental Exchange’s Bakkt has gone live with its bitcoin options and cash-settled futures contracts. The New York Stock Exchange’s sister firm announced that it's using its physically settled bitcoin contracts as a benchmark to support the new products, which were both announced in recent weeks. Read more.

Cryptojacking Malware Devs Sentenced to 20 Years in Prison: Two members of the prolific Romanian hacker gang Bayrob Group were sentenced to two decades in U.S. prison apiece after their malware mined crypto on 400,000 infected computers. Group leader Bogdan Nicolescu and co-conspirator Radu Miclaus were sentenced to 20 and 18 years respectively after being found guilty on 21 different counts of wire fraud, money laundering aggravated identity theft and other crimes. The gang was also accused of developing malware which mined bitcoin and monero using their host computers' processing power. Read more.

South Korea: Government Seeks to Tax Crypto Transaction as Capital Gains: The South Korean government plans to tax capital gains on cryptocurrency transactions. A Dec. 9 report from The Korea Times reveals that a revised bill to introduce the measure will be drawn up by the country’s Ministry of Economy and Finance by the first half of 2020. In parallel, the Korean National Assembly is in the process of advancing a related bill aimed at increasing transparency in cryptocurrency trading. If passed, the new regulations would come into effect one year after the Assembly’s plenary session. Read more.

Brazilian Police Bust Alleged Crypto Fraud That Cost Investors $360M: Brazilian police have shut down a purported bitcoin investment scheme they allege stole 1.5 billion Brazilian reals ($359 million). According to the Paraná state government, civil police in the state raided an unnamed organization in Sao Paulo, Curitiba and other regional cities last Thursday, claiming the group promised as many as 5,000 victims that they could produce sky-high returns on bitcoin investments. Read more.

Nvidia Battles Shareholders in Lawsuit Over Crypto Miner Claims: Chip making giant Nvidia has been making its case for why a court should throw out a lawsuit alleging it misled investors over cryptocurrency mining demand for its graphics cards. At a hearing over Nvidia's motion to dismiss in Oakland, California, the firm said Friday that shareholders had "cherry-picked" some company statements in an attempt to show that it had not been transparent over how much of its sales were due to miners, while ignoring others. Read more.

Uploads 2f1575928471642 hq75ek8d5wk 6c80d4c814a43063a8930fde641e8d09 2fwarren%2bdavidson.png?ixlib=rails 2.1


Representative Warren Davidson is one of the biggest Bitcoin proponents in Congress. We recently had the chance to schedule this interview during the Blockland Conference in Cleveland, Ohio.

Davidson has been very vocal about his beliefs around American liberties, along with the negative position the US government finds itself in from a fiscal and monetary policy standpoint. I have always found him to be fair and rational, which made this conversation a lot of fun to record. Highly recommend you don’t miss this one!

In this conversation, Warren and I discuss:

  • Bitcoin

  • Financial privacy

  • Taxation as theft

  • Debasing currencies

  • Libra's future prospects

  • How his peers are being educated

  • What he would do to fix the current issues

I really enjoyed this conversation with Warren. Hopefully you enjoy it too.


Interested in crypto research? Look no further. The premier research firm in the space, Delphi Digital, has two subscription offerings for individuals and institutions alike. Take a look at their Bitcoin and Ethereum reports to get a taste of their analysis. [Click here]

If you enjoy reading “Off The Chain,” click here to tweet to tell others about it.

Nothing in this email is intended to serve as financial advice. Do your own research.