--- title: “That’s Our Two Satoshis” - The Bounceback Rally description: The market bounced back last week, as should have been expected, as the equity / crypto divergence became too great. image: https://www.ar.ca/hubfs/Copy%20of%20TO2S%20375x175%20%282845%20%C3%97%201600%20px%29%20%2847%29.png --- [![email-sig-logowhite](https://www.ar.ca/hs-fs/hubfs/email-sig-logowhite.png?width=102&height=96&name=email-sig-logowhite.png "email-sig-logowhite")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** [![Arca](https://www.ar.ca/hs-fs/hubfs/arca_square_576x576.png?width=60&height=30&name=arca_square_576x576.png "Arca")](https://www.ar.ca/) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ** ** ** Search **Menu** ** ** [![Data Room](https://no-cache.hubspot.com/cta/default/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/72e2934a-0f70-4634-897e-b99fd4807a9b) [![Get in Touch](https://no-cache.hubspot.com/cta/default/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3.png)](https://cta-redirect.hubspot.com/cta/redirect/4536350/28ac2c2f-186c-436f-9682-1169cf946ad3) ![](https://www.ar.ca/hubfs/Blog/Thats%20Our%202%20Satoshis/Branding/2-Sats-Header.png) [Market Recap](https://www.ar.ca/blog/tag/market-recap) | # “That’s Our Two Satoshis” - The Bounceback Rally [![Jeff Dorman, CFA](https://www.ar.ca/hubfs/Jeff%20Dorman.png)](https://www.ar.ca/blog/author/jeff-dorman-cfa) Written by [Jeff Dorman, CFA](https://www.ar.ca/blog/author/jeff-dorman-cfa) Jul 15, 2024 ******![Thats Our 2 Satoshis Logo](https://www.ar.ca/hs-fs/hubfs/Thats%20Our%202%20Satoshis%20Logo.png?width=300&name=Thats%20Our%202%20Satoshis%20Logo.png)****** ******![Screenshot 2024-07-15 at 8.55.02 AM](https://www.ar.ca/hs-fs/hubfs/Screenshot%202024-07-15%20at%208.55.02%20AM.png?width=585&height=386&name=Screenshot%202024-07-15%20at%208.55.02%20AM.png)****** *Source: TradingView, CNBC, Bloomberg, Messari* **The Bounceback** The digital assets market had a strong bounceback week after the previous weekend’s capitulatory action. Some of the hardest hit, most speculative names like TIA (+31%), OP (+26%), SUI (+15%), NEAR (+15%), SEI (+13%) moved the fastest off the lows, while some of the bluer-chips like SOL (+2%) and AVAX (+1%) lagged. As is usually the case after market sentiment reaches rock bottom, it was (at least short-term so far) a strong buy signal.  Again, we point to just how ridiculous a sell-off like this was ahead of so many positives, including, but not limited to, the upcoming Ethereum ETF launch.   However, perhaps more interesting is the continued non-relationship between crypto and equities. Over a 30-day rolling period, correlations are now starkly negative. Still, over a longer period of time (6-month rolling), you can see below just how fast this positive relationship has been breaking down and how inconsistent these relationships are.     ![](https://lh7-us.googleusercontent.com/docsz/AD_4nXcqeejSjbIX6f2xuCeAg5GRGfwq6Hlo0JHlirskl53jsPYbYTjoOnhn72-BMEClxo2rACDEqdxl5Z6lD8tO_5PWJ7e4JtKijdkuahK964vwervNAmIOrxbkXJZ5BWIB43cw_JqxryKJ1XKz0cjTCqmksGU?key=hGMVTFtvimXRfvjn9-Ftrw)   All year, we have been talking about how both digital assets and U.S. equities have been dominated by a handful of large caps (BTC and ETH in crypto and the Mag 7 in U.S. equities). Heading into last week, small-cap U.S. stocks were down -2% on the year, while large caps were up +17%. This was the biggest outperformance of large over small caps since 1998.  Nearly all of my financial social media and chat rooms were filled with equity investors complaining about how stocks never go down, how valuations are too high, and how the market can’t stay elevated with such a small percentage of stocks carrying the whole market.  Most of these investors are subtly (or explicitly) predicting doom.     ![](https://lh7-us.googleusercontent.com/docsz/AD_4nXdF7YC3zzT8pvFqEaaHsuWYYFSsZy6kCJNdDi1tR5A-Bbz2x1hFe9X6DyFi3V0ZmZAJnyHBtmdU_nqcT-wnCjVwvwmp3KcQ8LN9tpoiYAQ10LTSribghmJQBky1byGnRcaTA4EuP1RZUXhbmC06YJNvSc9J?key=hGMVTFtvimXRfvjn9-Ftrw) *Source: *[*Twitter*](https://x.com/charliebilello/status/1810293547112817017?s=46&t=e_HO6YZP2lhbFDHG5e0fKQ)   So what happened next?  Naturally, last week, small caps outperformed large caps, with a massive rotation trade on Thursday whereby small caps outperformed large caps by +4.5% in a single day, a 6 standard deviation event, and the second biggest outperformance on record (trailing only the 10 sigma differential on October 10, 2008).  The rotation followed economic data on Thursday (weak CPI report) that showed inflation is largely a problem of the past, and therefore rate cuts are going to happen sooner than expected. So instead of a market crash, it was quite the opposite. By all accounts, Thursday was one of the most “risk-on” days in the markets this year, even though the S&P 500 and Nasdaq were down on the day due to the rotation out of stocks that make up the bulk of the market-weighted indexes.     ![](https://lh7-us.googleusercontent.com/docsz/AD_4nXcu68pNTu9CzibjwUpLsrUCfUE75B_PNqKnUZN6bL9fNuW-RQw6IROWy651X-DkuIjvHTd_hW8VcZ3t7Zcz_G0Jk994NkrZYk95gl4NFzPSeDd-D8tWzwHevrtVotpNwvep-Px_f-ue2XxU_grSLee6ytQ0?key=hGMVTFtvimXRfvjn9-Ftrw) *Source: Anchorage Digital*   ![](https://lh7-us.googleusercontent.com/docsz/AD_4nXd_iEy2ubZ4B1-PE5hxToCCLnBdfWCvhOwNZU6vIVkAT77dDML_eCLCm6F3BTHBAVfm0mEt0_m3DzdY1CNqw_7JqewWe-K6o9-hLUPKIxJorPMtLRpmeoRpcWDPNGD25UwMtyoyXCCzitQNtxeFtInz9Lku?key=hGMVTFtvimXRfvjn9-Ftrw) Source: [Twitter](https://x.com/charliebilello/status/1811598811388694985)   But once again, digital assets did not respond.  The divergence between equities and crypto continued until the weekend, when crypto finally became well bid, rallying into the Sunday night U.S. futures market open. This rally was most likely attributed to the Trump assassination attempt, which further increased the odds of a Republican takeover in November. The odds of Trump winning in November rose to +70% on Polymarket. Trump is still scheduled to speak at BTC Nashville.   While [we’ve been saying for weeks](https://www.ar.ca/blog/the-2021-redux) that the market was set up for a rally, given that the positive long-term factors should have outweighed the negative short-term factors, we were not alone. Bitwise made an almost identical case last week, and many other fund managers [felt the same way](https://x.com/Travis_Kling/status/1810716846133485578).    So here we are heading into a week that will likely yield the launch of the Ethereum ETFs (anticipated for July 18). The ETF date and event have been incredibly well-telegraphed since May but have been largely shrugged off by the market—until now. Meanwhile, the Bitcoin ETF keeps shattering records in terms of volume, AUM, and adoption.   Should be an interesting week.    ![](https://lh7-us.googleusercontent.com/docsz/AD_4nXd6msSP0Y_qVe7apNOU2hyZlNumbNArlq0-vC1fY40nYoBStZBz5b5Fmw8ZIzzrjvcKMaQpA55eGjTaLLouifwxtBardwjqWTA6UWUe-arXSyqMw--cd58PKgeKh25AhCnvT4F7S2h8TorK_nQ_TY7JK4DW?key=hGMVTFtvimXRfvjn9-Ftrw) *Source:  *[*Bloomberg*](https://x.com/EricBalchunas/status/1811033187704844706)     ***And That’s Our Two Satoshis! ****Thanks for reading everyone! Questions or comments, just let us know.*   **The Arca Portfolio Management Team** *Jeff Dorman, CFA - Chief Investment Officer* *Katie Talati - Director of Research* *Sasha Fleyshman - Portfolio Manager* *David Nage - Portfolio Manager* *Wes Hansen - Director of Trading and Operations* *Michal Benedykcinski - Senior Vice President, Research* *Nick Hotz, CFA - Vice President, Research* *Kyle Doane - Vice President, Trading* *Alex Woodard - Associate, Research* *Christopher Macpherson - Research Analyst* *Andrew Masotti - Associate, Trading and Operations*     **To learn more or talk to us about investing in digital assets and cryptocurrency** **call us now at [(424) 289-8068](tel:+14242898068).** ### Subscribe For the Latest Blockchain News & Analysis     Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional. Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services. 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