Market Deep Dive: Volatility, ETH ETF Approval, Macro Trends, and Economic Outlook

This week commenced with notable volatility in the cryptocurrency markets, echoing the patterns we’ve seen in the last weeks. Following a brief squeeze on Sunday evening, prices trended downward into Monday. Consequently, BTC started the week on the lower end of its range at $26,000 and spiked to $27,300 on Thursday afternoon following the announcement concerning ETH futures ETF approval of Valkyrie. They received permission to launch the first (actively managed) ETH futures ETF on CBOE, utilizing cash-settled contracts from CFTC-registered exchanges. Accordingly, Ethereum (ETH) began the week at $1,560, but it soon outperformed BTC with a rise to $1,670. The ETH/BTC ratio was indicative of this performance, oscillating around 0.06150, hinting that an ETH/BTC ratio around 0.06 from last week might present a strong bottom.

As Friday dawns, the crypto sector is abuzz with the approval of the ETH futures ETF, hinting at further similar approvals down the line (15 other ETH futures awaiting approval). While the excitement surrounding the ETH futures ETF is palpable, BTC spot ETF applications, especially from giants like BlackRock and Invesco, face delays (as anticipated) and will most likely not receive a permit this year. For BTC spot ETF applications, the upcoming deadline is now set for mid-January 2024, with a final decision to be made from the SEC by no later than mid-March. On another note, DeFi tokens, with MKR and COMP leading the way, have been quietly recovering and outperforming also Ethereum.

Transitioning to macroeconomic perspectives, on Monday, we were reminded of 2014 when a significant Euro weakness made the Dollar Index rise for 11 consecutive weeks. The recent rise in the USD Index to over 1.06 came on the back of hawkish comments by the Feds Kashkari and Goolsbee, with the 10-year yield reaching 4.54. Correspondingly, EURUSD dipped to 1.0580 while Gold and Silver prices experienced declines. Simultaneously, US shares had a short-lived upswing, only to retreat subsequently. US government shutdown warnings and concerns about China’s Evergrande further added to the macroeconomic unease.

Tuesday figures correspondingly added to the prevailing uncertainty with revised US building permits from August narrowly missing forecasts (act. 1.541M, exp. 1.543M), lower New Home Sales (act. 675K, exp. 700K) as well as the US Conference Board measuring Consumer Confidence significantly lower than July’s numbers of 108.7 and lower than estimated (act. 103, exp. 105.5).

On Wednesday, one of the major highlights was UBS facing increased scrutiny by the US Department of Justice over alleged CS Violations against Russian sanctions, which saw its shares drop and momentarily halt, ultimately pressuring the Swiss Franc.

On Thursday, the German CPI (MoM) was reported at 0.3%, aligning with expectations. Similarly, the US GDP (QoQ) matched expectations at 2.1%. Initial Jobless Claims were recorded at 204K, lower than the projected 215K, further indicating a robust US job market.

Today morning YoY UK GDP came in at 0.6% slightly better than estimates of 0.4%. Further economic events to watch out today will be the European CPI numbers this morning and US Core PCE this afternoon. The next economic week is set to be quieter. Key economic events include the monthly U.S. ISM Manufacturing PMI on Tuesday, Non-Manufacturing PMI on Wednesday, Nonfarm Payrolls as well as Unemployment Rates on Friday.

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