Hello readers,

BTC long-term holders are back in the market, distributing their coins to new market entrants. This is now the third distribution phase of this cycle.

Which begs the question: do long-term holders know something that we don’t?

In this week’s report, we look for cracks in the economic data and share some essential onchain data as we update our outlook for the rest of the year.

Disclaimer: Views expressed are the author’s personal views and should not be relied upon as investment advice.

Let’s go.

Economic Data

Earnings

S&P 500 operating earnings per share continue to move higher, with analysts projecting earnings to rise further into ‘26 (see below).

Forward Earnings

Margins

Profit margins are also showing strength, with productivity growth (AI) beginning to appear in the data. Analysts are now forecasting profit margins to continue to improve.

Retail Sales

Yesterday we got the latest retail sales data. Redbook retail sales in the US are up over 6% compared to one year ago.

Consumption is roughly 70% of GDP, so if the economy is truly rolling over, we would expect to see weakness here.

Retail Sales vs Payrolls

While retail sales show strength, the labor market is showing weakness. We can see that here, as the light blue line (retail sales) and private payrolls (dark blue) move in opposite directions.

This is similar to what we saw last summer, just before the Fed cut 100 bps (payrolls rose initially to meet sales data before dropping off in Q1).

Naturally, these two lines cannot disconnect like this for long. Either payrolls need to rise, or retail sales need to drop. Given that the Fed is likely to begin another rate-cutting cycle, we think it’s more likely that the former plays out.

A rate cut (and forward guidance for more) should instill the confidence needed for CEO’s and business leaders to hire people and invest in growth.

GDP

The latest Atlanta FED GDP estimates for Q3 came in at 3.4%, up from 3.1% last week. The takeaway? It appears that personal consumption + strong earnings and margins are driving the economy.

Credit Spreads

Credit spreads remain subdued. This data is telling us that risk-on sentiment rules the day. Investors are comfortable taking credit risk in exchange for slightly higher yields.

It’s also telling us that companies with weak balance sheets are able to access capital. Naturally, meme stocks and other risk assets have been rallying.

With rate cuts anticipated, we think credit spreads could move even lower.

Labor Market

The labor market is weakening, but the above chart indicates that the supply and demand for labor are currently at equilibrium. As a result, the unemployment rate is still anchored around 4.3%.

In our opinion, labor market weakness is due to:

1. A decrease in foreign-born workers as the Trump administration deports illegals.

2. Young people are having a hard time finding work (10% unemployed):

3. And increased spending on productivity-enhancing technology (driving efficiency):

Summary

We are trying to find reasons to be bearish. But we’re just not seeing it in the US economic data.

With the Fed now poised to cut rates, you either believe:

1. They are cutting into a weak economy, making it a “sell the news” event.

2. They are making “insurance” cuts to bolster the weakening labor market, but this is not an environment where massive stimulus is needed to recharge the economy.

Given the strong economic data presented above, we are in camp #2 at this stage.

Let’s shift to some crypto market data — where BTC long-term holders have been taking profits…for the third time this cycle. 

What does that tell us about the outlook for the crypto market?