Market Deep Dive: ETF Excitement, Altcoin Surges, and Macro Insights

This week in crypto saw heightened excitement with the anticipated approval of 11 spot BTC ETFs on Wednesday and their launch on the CBOE on Thursday. BTC started the week hitting its low on Monday above the $43,200 band and surged to just under $48,000 on Tuesday evening after an erroneous early tweet from the SEC about the ETF approval. After Gary Gensler corrected the tweet and announced that the SEC website had been hacked, prices fell back to $44,300 on Wednesday afternoon. Following the market’s reaction to the misleading approval tweet, many participants adjusted their positions, e.g., switching to ETH and taking profits under the adage “buy the rumours, sell the news”. Consequently, when the actual ETF approval took place the next day, BTC only climbed to $47,600. Attention then shifted to Thursday, with the launch of the ETFs, where BTC briefly approached the $49,000 mark before falling back to around $46,000. This retreat was primarily driven by short-term profit-taking, a shift towards altcoins and macro factors such as concerns over a strengthening USD in light of higher-than-expected inflation figures. The first day of trading in BTC ETF saw a volume of $4.6 billion, and it will be interesting to see how much AuM this generates.

Contrary to my initial short-term preference for SOL over ETH, the Ethereum ecosystem demonstrated remarkable strength this week, initiating a rally earlier than anticipated (the SOL/ETH ratio lost its bullish trend over the weekend). As the week progressed and the approval of the spot BTC ETF became increasingly likely, traders shifted their focus to the ETH ecosystem, anticipating a similar outcome for an ETH spot ETF in May. This led to a surge in Ethereum’s value, starting from around $2,170 on Monday and reaching a peak just below $2,700 on Thursday. Following BTC’s strong performance, the ETH/BTC ratio quickly dropped to below 0.048 after the SEC’s fake tweet late on Tuesday, marking its lowest point since April 2021. This decline created an opportunity for many traders to switch cheaply from BTC to ETH and play the altcoin rotation in line with the “buy the rumours, sell the news” narrative. As a result, the ETH/BTC trend experienced a reversal over the week, sparking a significant rally as many investors exhibited FOMO (fear of missing out), pouring into ETH and related altcoins. This surge in interest continued even on Thursday, with ETH already outperforming BTC by over 10% from its low, and trading at a high of 0.055. It is currently trading just below 0.057.

Overall, my outlook for altcoins remains positive but I believe there is a potential opportunity to buy ETH at a higher low, probably between the $2,250 and $2,400 levels in the near term, as there is a lot of liquidity sitting there from over-leveraged ETH ‘late’ market entrants is sitting there. Regarding volatility metrics, bitcoin’s 30-day implied volatility came down notably and stands at 53% (-13% WoW) and Ethereum’s is at 59% (-10% WoW). The 25-day delta skewness has shifted to negative (indicating a bearish outlook with more puts sold than calls) for timeframes of 0 to 90 days for BTC, and 0 to 60 days for ETH, suggesting potential for choppy weeks ahead with the possibility of some liquidity grabs. However, the skew remains positive for longer timeframes.

On the macro side, the focus this week was on the US CPI data for December, which surpassed expectations (YoY exp. 3.2%, act. 3.4%). Moreover, the jobless claims were lower than anticipated (exp. 210k, act. 202k), exerting additional pressure on stocks. However, this was balanced by falling Treasury yields.

In the UK, this morning’s GDP report was in line with projections, showing a YoY steady rate of 0.2%, and a MoM figure slightly higher than expected (exp. 0.2%, act 0.3%). Today’s major announcement is the US PPI Machine Manufacturing. Furthermore, FOMC member Neel Kashkari will speak this afternoon. Looking ahead to next week, significant economic events include German CPI and China GDP on Tuesday, UK CPI, EUR CPI, and US Retail Sales on Wednesday, concluding with the Philadelphia Fed Manufacturing Index on Thursday.

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