Brent crude oil has risen above $104, and BTC has been fluctuating around $82,000 all week.
You keep staring at the candlesticks, getting more anxious the more you watch. Buying the dip risks further decline, not buying risks missing out.
Stop. What you should really focus on now isn’t the price, but three signals.
BTC dropped from 87,000 to 80,427, falling nearly 3% in a week, now stuck oscillating between 82,000-83,000. The Fear & Greed Index fell from 71 to 56. On the ETF side, there was a net outflow of $485 million in a single day, the largest since June.
On the other hand, Brent crude is at $104.72, up 2.4% for the week. The September FOMC minutes were hawkish, with 19 officials unanimously supporting rate hikes, and most expecting another hike before year-end. Inflation has been above target for over five years, and the Fed has no plans to ease up.
The short-term macro environment is unfavorable for risk assets.
But don’t rush; three supply-side tailwinds are accumulating: Russia has lifted the ban on exporting 500,000 tons of diesel, the G7 is discussing releasing strategic reserves, and China has resumed refined oil exports. Bearish and bullish factors are fermenting simultaneously, making this the toughest time to trade.
So don’t guess the direction, watch these three signals—
Signal One: Diesel crack spread.
The diesel crack spread has fallen from $85/barrel last week to around $70. In a normal year, this figure is between $15 and $30. Although still historically high, the direction has changed.
Diesel is the lifeblood of the economy. When diesel is expensive, transportation costs rise, pushing prices of everything up. If the diesel crack spread continues to fall, the peak of energy inflation is near. This is the most leading signal.
Signal Two: 30-year US Treasury yield.
The 30-year yield is now around 5.6%-5.7%, the highest since 2002. BMO analysts say breaking 6% is "inevitable."
But note, the October 9 auction of 30-year Treasuries saw strong demand, with a bid-to-cover ratio of 2.54, higher than the average of the past six auctions, and yields immediately fell. If Treasury yields start to decline from here, risk appetite will recover. This is the confirmation signal.
Signal Three: Hormuz Strait throughput.
Current crude oil transit volume has dropped 27% from wartime highs, at 10.1 million barrels per day [data]. If this number returns to above 15 ships per day, it indicates the geopolitical premium is fading.
Okay, signals explained. Now for position advice—
Spot holders: Hold.
BTC at $82,000 is still undervalued from a cycle perspective. Analysts say the strongest support is between 77,000-74,000, which is the "true market mean" and the short-term holder cost line. Even if it dips there, it doesn’t mean the bull market structure is broken; that’s called a "retest." Don’t panic sell your chips.
DCA investors: Maintain your rhythm, double down on dips.
If BTC drops to 78,000-80,000 due to energy inflation data, that’s when you should add to your position, not fear. Supply-side tailwinds take time to transmit. Russian diesel is already on the way, why rush?
Futures traders: Don’t heavily bet on direction now.
Energy supply tailwinds and geopolitical risk headwinds are fermenting simultaneously. Oil prices rising doesn’t necessarily mean BTC falls; oil prices falling doesn’t necessarily mean BTC rises. Any one-sided bet risks being wrong on both sides. Wait for clear turning points in the diesel crack spread or Treasury yields before entering.
The relationship between oil prices and BTC has never been linear. Sometimes oil rises and BTC falls; sometimes oil falls and BTC also falls.
What you really need to watch isn’t the oil price itself, but the inflation expectations behind the oil price, and the Fed’s signals behind those inflation expectations.
The Fed already hiked rates in September. The market now prices an 80.6% chance of no change in October and a 64.1% chance of another hike in December. If the diesel crack spread continues to fall and inflation expectations cool, that December hike might not happen.
That will be the real breathing room for BTC.
Don’t guess the bottom. Watch the signals.
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