Last Friday, Bitcoin (BTC) failed to break above USD 72,000 and experienced a significant sell-off, dropping to USD 68,400 after higher-than-expected Nonfarm Payrolls were released. Funding rates peaked and came down by more than 60% since then. This situation sparked speculation about the nature of ETF flows — whether they are predominantly directional or focused on basis trades (non-directional). The fact is that so far, ETF flows tend to be substantial when funding rates are high, and outflows are observed when funding rates are low. Even if this speculation proves unfounded, it presents an intriguing opportunity: one could purchase BTC at a lower price when funding rates are low and then short CME futures to secure gains and play the basis once funding rates start to rise again. Although this strategy is theoretically market-neutral, I remain sceptical that unwinding large positions when the basis is low will not affect prices.
On Monday, during the US session, Bitcoin (BTC) failed to surpass USD 70,200 and experienced a sell-off overnight due to a combination of short-term risk-off sentiment, bearish market outlook, and negative BTC ETF outflows. BTC found a bottom during Tuesday’s US session above USD 66,000 and retraced to USD 70,000 on Wednesday as the US Consumer Price Index (CPI) numbers came in lower than expected, raising hopes for at least two rate cuts this year. However, later that day, the Federal Reserve kept interest rates steady (reducing projected rate cuts from three to one this year), and the FOMC press conference was more hawkish than anticipated, causing BTC to retrace its entire move back to USD 67,000.
Even lower-than-estimated US Producer Price Index (PPI) figures and higher Initial Jobless Claims did not help BTC to push higher. Initially, the news drove BTC to USD 68,500, but it subsequently fell to lows of USD 66,250. Currently, BTC is trading below USD 67,000, with the first resistance around USD 66,000, from which it could quickly drop to USD 62,000-64,000 and then to USD 60,000. If USD 67,500 becomes a resistance level for an extended period, further downside between USD 60,000 and USD 64,000 is likely. Nevertheless, I believe USD 60,000 is a bottom, as there are strong bids around the levels between USD 60,000 and USD 62,000.
ETH and other altcoins are heavily dependent on BTC. Despite Gary Gensler’s announcement that ETH ETF S-1 approval is expected in late summer, ETH showed weakness throughout the week. It dropped to USD 3,380 on Tuesday, retraced to USD 3,660 on Wednesday, and is currently trading above USD 3,500. The ETH/BTC ratio has lost 1.8% week-on-week (WoW), and its trajectory remains closely tied to BTC unless unexpected ETH ETF news emerges.
This week, US equities closed at all-time highs (ATHs) for the fourth consecutive day, while crypto markets exhibited weakness. Crypto analysts suggest that this divergence may be due to BTC miners undergoing post-halving capitulation, offloading their supply and capping the price.
The 30-day BTC at-the-money (ATM) implied volatility slightly decreased from 51% to 48% (-3% WoW), while the 30-day ETH ATM implied volatility decreased from 61% to 59% (-2% WoW). The 25-delta skew has decreased slightly but remains positive across time frames longer than seven days, with a higher skew for ETH than BTC.
Key economic events next week include the EUR CPI and Retail Sales on Tuesday, the SNB and BOE Interest Rate Decisions on Thursday, and the US PMI and Fed Monetary Policy Report on Friday.
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