The BTC consolidation phase was shorter than anticipated. After trading in the $50-53k range last week, BTC broke through during Monday’s US session, bolstered by bullish momentum. This was reflected in the return of significant trading volumes and ETF inflows, with daily inflows totalling over $500 million from Monday to Wednesday, culminating in a record net inflow of $670 million on Wednesday alone. Concurrently, Blackrock’s IBIT ETF experienced four consecutive days of daily trading volumes in excess of $1 billion. As the momentum persisted into Wednesday, BTC briefly neared the $60k mark, a high not seen since November 2021, before pulling back ahead of the US session. Continued strong buying pressure in the US session led to a short squeeze that pushed the price of BTC to $64k. Increased activity from retail investors caused a network outage on Coinbase, potentially exacerbating the short squeeze. This sharp volatility led to the liquidation of over $100 million in a matter of minutes, totalling $800 million in 24 hours (the largest short liquidation event in the last three months). Subsequently, prices dropped to lows of $58-59k on several exchanges after reaching the $64k peak.
Despite the high funding rates, prices rebounded in yesterday’s session, peaking twice at around $63.7k, before dropping to just above $60.3k, and closing the month just below the all-time monthly high. Last night, there was significant buying activity around $60.6-60.7k, indicating that a break below this level could trigger a significant sell-off. Conversely, a break above $64k could swiftly lead to a new all-time high.
Over the weekend, ETH broke out of the previous week’s range, staying above $3,030 and peaking at $3,520. It is currently trading around $3,380. Support levels are established at approximately $3,300 and $3,150, with resistance at $3,520, and a potential next hurdle at the March 2022 high of $3,580. If we hit this resistance level, keep an eye on SOL. A move into SOL could then be an interesting entry point.
The ETH/BTC ratio hit a high of around 0.06 on Monday, before dropping to around 0.054 on Thursday. For traders bullish on ETH and anticipating an altcoin rally, this could be a viable entry point. However, the assumption that the dominant inflows into spot BTC ETFs are driving the market rally (traditional finance money), without the option to rotate into ETH, casts doubt on the traditional rotation pattern. This supports the view that BTC may continue its own cycle, especially in the absence of a spot ETH ETF.
On the altcoin side, meme coins stood out this week, initially driven by strong demand and hype for PEPE. The bullish sentiment and hype quickly spread to other meme cryptocurrencies such as WIF and BONK on the Solana blockchain, as well as Dogecoin. Consequently, the surge in SOL meme coins also increased SOL activity, and the SOL price increased by 28% WoW accordingly. On a funny note, Dogecoin might be interesting as it is one of the only coins that has managed to make higher highs against BTC over the full past two bull run cycles (see DOGEBTC).
Bitcoin’s 30-day ATM implied volatility rose to 62% this week (+9% WoW), while ETH’s surged to 64% (+6% WoW). The 25-day delta skew is positive for both ETH and BTC across all time frames. Notably, BTC’s skew is higher on shorter time frames, while ETH’s skew curve is steeper on longer time frames. Last week’s negative skew may have caught some options desks off guard, potentially leading to a gamma squeeze on options expiring around the 60k level this week.
On the macro side: on Tuesday, the US reported that consumer confidence fell to 106.7 in February, down from 110.9 in January, and below the anticipated 114.8. On Wednesday, the US GDP growth rate (QoQ) for the fourth quarter was recorded at 3.2%, marginally missing the forecast of 3.3%.
Yesterday, German Retail Sales (MoM) came in at -0.4%, missing forecasts of 0.5%, while the US reported Core PCE Price Index data at 0.4% MoM (+2.8% YoY) in line with the forecasts.
Today, the focus is on the preliminary EU inflation and US PMI data. Next week’s key events include US Services and Non-Manufacturing PMI data on Tuesday, JOLTS Job Openings on Wednesday, the ECB interest rate decision on Thursday, and US NFPs on Friday.
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