In Monday’s Crypto Crisp, we took a bearish stance, driven by a worsening economic outlook, with growth falling short of expectations and liquidity conditions looking grim for September. Since then, the crypto market has continued its decline.

While we believe September will likely be challenging for digital assets, it is too extreme to claim the bull market is over. Simply put, we just need to weather this month. We expect further declines or, at best, sideways movement in September. However, we expect October and the following months to perform extremely well.

Short-term pain

Our U.S. macro regime model points to a “down, down, down” scenario for inflation, growth, and liquidity, with the latter two having a significant impact on digital assets. In just ten days, U.S. corporate taxes are due, which will further drain U.S. dollar liquidity.

Chart 1: U.S. Macro Regime Model: Inflation, Growth, and Liquidity