Week-over-week performance:
- BTCUSD: 56,198 / +8.17% (!)
- ETHUSD: 3,226 / +10.18% (!)
- US10Y: 4.28% / +0bps
- DXY: 103.75 / -0.55%
- GOLD (USD/OZ): 2,033 / +0.54%
- NDX: 17,933 / +0.38%
- VIX: 13.73 / -3.64%
On the macro side:
There was a lack of significant macroeconomic news last week, with the FOMC minutes revealing little of note other than the Fed’s cautious approach to cutting rates too swiftly.
There is a consensus among the governors to cut rates in the face of softening inflation, even in the midst of a strong real economy.
Although there is a growing consensus that the Fed may have completed its hiking cycle, expectations for the first-rate cut have shifted from March to June.
The projected EoY rate ranges from 4.5% to 4.75%.
However, historical trends suggest that market participants are often wrong in predicting the exact target rate over a one-year period.
Nevertheless, the prevailing sentiment suggests a downward trajectory, and the Fed’s willingness to consider rate cuts in a robust economic environment supports my optimistic view on risk assets.
Looking ahead, the economic calendar for the coming week remains relatively light, which should support the current bullish price momentum.
Chart 1: Target Rate Probabilities for 18 December 24 Fed Meeting vs. 1 month ago
Looking ahead:
- Wednesday, 28 February: US GDP QoQ
- Thursday, 29 February: CH GDP QoQ, US PCE
- Friday, 1 March: CNY PMI, EU CPI
On the FX side:
In a week characterised by a lack of significant news, we observed the euro strengthen, the Swiss franc weaken, and the US dollar weaken.
As we await the release of the EU CPI data on Friday, I remain inclined towards a long position on EURCHF.
With the Dollar Index (DXY) nearing the accumulation zone of 102.6-103.6, a weaker US dollar is usually a good sign for risk assets.
Chart 2:DXY 1d
On the crypto side:
In the current bullish market environment, bitcoin ETFs have hit record highs, ethereum is once again displaying high-beta characteristics, and the Uniswap Foundation is seeking to elevate UNI to utility token status.
Notably, the total crypto market capitalisation has surged above $2 trillion for the first time since December 2021.
Despite the frenetic market activity, the FOMO sentiment appears to be tempered, which is a positive sign.
While the market looks stretched, it continues to deliver returns.
Bitcoin’s Futures basis stands at 17% (my upper threshold is around 30%), 30-day implied volatility remains below 60% (placing it below the 1-year 3rd percentile), and the 30-day 25d risk-reversals (call-put) at 2% suggest potential for further upward movement.
However, identifying the next significant trend remains crucial.
While I remain sceptical about the imminent arrival of an ethereum spot ETF, recent price movements and volatility trends indicate that ethereum could once again function as a high-beta asset.
In this context, names such as LDO and ENS present themselves as potential opportunities for leveraging this trade.
The Uniswap Foundation’s fee distribution proposal has significant implications for the market.
If implemented, this move could set a precedent for other protocols such as BLUR, DYDX, 1INCH, SUSHI, FXS, CRV/CVX, and potentially pave the way for entities such as MetaMask and OpenSea to issue their own coins (similar to the UNI airdrop).
From a technical standpoint, in the current highly volatile environment, BTC faces resistance at $57k with support at $52k, bringing the all-time high into closer view.
Chart 3: BTCUSD 1d
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