Levolytics Research #22: Crypto + Software Sell Off
Edition #22 | See dudeterminal.com
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Our Take on the Market
In our previous newsletter, we concluded with the following points:
Bears remain in control of BTC price action on higher timeframes
Leverage has been cleaned out from $85,000 to $60,000
Our market approach remains defensive
Last week’s write up hammered the idea of “we are oversold, but it’s still an uncertain period where the top priority is moving slow to protect capital + mental sanity”.
However, in our Friday newsletter we mentioned that we believe we are due for some violence on lower timeframes to close out February / begin March.
Within we will discuss how these pieces tie together, and how things have shifted over the past week to better understand what it will take to get us more willing to tack on additional risk into crypto markets.
Metric: Average 22-Day (~1 month of business days) % return for all stock in IGV ETF
IGV = iShares Expanded Tech-Software Sector ETF
This ETF is known as a pure-play software ETF, and has been at the center of discussion as AI fears have overwhelmed market participants
Current value = -15%
Bottom 10% of values = -7.12% or less
Using data going back to July 2001
Metric Takeaway:
Financial markets are in a state of pure panic at the moment. One of the easiest trades of the past 20 years - long software, is truly under the gun as investors begin to question the impact of AI on software companies and their abilities to maintain their competitive moats / command a pricing premium for their respective products and services.
Simply put - there is a lot of uncertainty looming over markets at the moment. These are not easy trading conditions, and for long-only trend traders (which is the Levolytics strategy) is a period where no position feels like the best position.
However, there is another take on all of this that is more constructive. From a pure data perspective we have the following:
This is one of the worst sell offs in software in 20+ years
IGV tagging support at $80
Both of the IGV legs down moved in lock step with crypto markets - dumps in end of November 2025 and February 2026
Both of these asset classes are trading at historically oversold levels
Within crypto market trading circles there’s been a great deal of wound-licking, as crypto has felt very singled out amongst sellers. The data shows that this is not completely true and that crypto likely sits within a pocket of asset categories that needed shorter term repricing in the context of the new world we’re moving into. This “pocket of assets” is showing many signs of overextension to the downside which provides something to watch in the coming weeks.
