Market Deep Dive: BTC failed breakout above USD 70k and ETH Faces Short-term Profit-Taking

After last Thursday’s approval of the ETH Spot ETF and higher volatility during the session, BTC recovered over the weekend. With US markets closed and less volume in the markets on Monday, an aggressive short squeeze pushed BTC above USD 70,600. Despite medium to long-term bullish sentiment news of a Mt Gox trustee moving USD 9 billion in bitcoin for potential distributions sent BTC lower. The cryptocurrency defended the USD 67,100 level several times (strong first support) and squeezed to USD 69,500 in yesterday’s US session, with no follow-through. It is currently trading above USD 68,000. On the upside, the first resistance is at USD 69,500, followed by USD 70,600. If BTC can close above this level on a daily candle, I am inclined to expect new all-time highs, as major future liquidations between USD 70,000 and USD 72,500 will likely elevate the coin through this range quite quickly.

ETH also recovered over the weekend, peaking slightly below USD 4,000 on Monday evening as bearish posts and signs of short-term profit-taking began to appear. Consequently, ETH declined throughout the week, bottoming above USD 3,700. It is currently trading around USD 3,740. Since the ETH news, the ETHBTC ratio found strong support at 0.0535 and peaked at 0.0575. I expect it to trade within this range over the coming weeks.

In the altcoin market, memecoins such as WIF, PEPE, and SHIB rallied over the weekend and at the beginning of the week. However, by mid-week, most of them had peaked and saw sharp declines of more than 20%, followed by slight recoveries.

On Tuesday, US Consumer Confidence rose to 102 in May, up from 97.5 in April, surpassing the forecast of 96. However, on Thursday, preliminary US GDP data (QoQ) for Q1 came in at 1.3%, below the 1.6% consensus, while Initial Jobless Claims were slightly above the estimates (expected 218k, actual 219k). Consequently, US stocks closed lower yesterday.

Overnight, China’s Manufacturing PMI data was lower than expected (expected 50.5, actual 49.5), causing volatility for the CNY. This morning, preliminary EUR CPI data will be released, and in the afternoon, all eyes will be on the Core PCE Price Index data during the US opening.

The 30-day BTC ATM implied volatility slightly fell from 51% to 50% (-1% WoW), while the 30-day ETH ATM implied volatility fell from 66% to 63% (-3% WoW). The 25-delta skew remains positive for both BTC and ETH on all-time frames longer than 7 days, with a higher skew for ETH than BTC. Nevertheless, BTC front-end skews descended (keeping the front skew negative), which might change after this morning’s significant option expiry.

From a macroeconomic news perspective, next week will be busy with key economic events, starting with US Manufacturing PMI data on Monday, US JOLTs Job Openings on Tuesday, US Non-Manufacturing and Service PMI data on Wednesday, the ECB’s Interest Rate Decision on Thursday, and finally, the NFPs on Friday.

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