This week has been packed with US economic news that has been fuelled a risk-on sentiment, at least for traditional risk assets.
The S&P 500 closed above 5,540 yesterday, driven by softer PPI and CPI data, slightly lower-than-expected jobless claims, and stronger-than-anticipated retail sales.
Fed Funds Futures are now pricing in a 68.5% probability of a 25 bps rate cut in September and a 43.1% probability of an End-of-Year target rate of 425-450 bps (1% lower than current levels), as market consensus adjusts to the view that the US economy is holding up reasonably well.
Crypto markets also attempted to follow this positive trend, but overall, price action has been choppy.
Throughout the week, BTCUSD ranged between USD 61,800 and USD 56,000 (10%), while ETHUSD fluctuated between USD 2,500 and USD 2,780 (11%).
Despite the news that Marathon Digital ($MARA), one of the largest bitcoin mining companies, completed its offering of 2.125% convertible senior notes due 2031 – using the proceeds to purchase approximately 4,144 BTC at an average price of USD 59,500– headlines about the US government & Mt. Gox BTC transfers, along with Jump offloading more ETH, contributed to slowing the crypto rally. It also added more pressure to an already thin market.
This week also brought the latest 13F filings, which revealed that Capula Management and Avenir Capital added to their BTC positions, while other brokers reduced their holdings.
In the ETH space, ETF flows remained relatively low.
In derivatives, positioning remains bearish, with perpetual contracts trading at or below spot prices, and term futures showing a relatively compressed 5-7% premium.
Short-term volatility has decreased but not as quickly as in equities, where the cash VIX is back at 15.22.
Despite this, we continue to see a 1.2x premium for ETH options compared to BTC, with long-term call options sticky on the upside.
Among altcoins, AAVE gained some traction across all desks as daily revenue jumped over USD 2.1 million following the liquidation of USD 234 million worth of collateral earlier this week.
Supported by a recent landmark governance proposal passed over the last weekend, many are optimistic about a return of more protocol revenue to token holders.
Additionally, Andre Cronje’s appointment as CTO of Sonic Labs has raised hopes of a DeFi summer, even though the Total DeFi market cap stands at USD 72.7B, down 44% from its March high, compared to the overall crypto market cap which is down 26% from the March peak.
DeFi applications are being used less, and crypto communities are not what they were in 2021.
Looking ahead, next week will bring the release of EU CPI data, along with remarks from FOMC members ahead of the FOMC meeting and the Jackson Hole Symposium on Friday and Saturday.
As liquidity remains thin as the summer draws to a close, we anticipate price moves to be exaggerated, but with no major catalysts on the horizon, we do not expect a significant breakout until Q4.
Read more News here.
