TA Tuesday: BTC stagnant as ETH rallies

BTC stagnant as ETH rallies; Fed faces critical juncture in policy decision making amidst stable banking crisis and decreasing volatility.

Week-over-week performance:

  • BTCUSD: 29,711, -1.04%
  • ETHUSD: 2,104,+9.87%
  • US02Y: 4.2%, +22 bps
  • DXY: 101.89, -0.40%
  • GOLD (USD/OZ): 1,999, -0.05%
  • NDX: 13,087, +0.27%
  • VIX: 16.94, -10.65%
  • VVIX: 83, -3.31%

On the macro side:

The Federal Reserve is currently facing a critical juncture in deciding its next move amidst a stabilised banking crisis and decreasing equity volatility.
While this may grant the Fed more flexibility in tackling inflation, certain officials believe that further policy tightening may be necessary to curb inflation, despite Barkin’s view that it has peaked.

The market predicts a 25% increase in May with a 75% likelihood, but with US inflation at its lowest level in nearly two years, the Fed is expected to proceed with caution, keeping future rate hikes minimal and systematic to avoid market volatility.
Yield markets are also agreeing to a 25 bps hike with US02Y trading at 4.2% up 22bps WoW.
This predictability is beneficial in avoiding volatility, which may spread to the crypto market, leading to potential volatility crushing.

The upcoming week is light on significant data, with only a few notable events scheduled, such as China’s Q1 GDP release on Tuesday, UK inflation data on Wednesday, and EU PMIs on Friday. Investors will closely watch bank results for any signs of stress or changes in deposit bases.
While the cryptocurrency market has been lively recently, it may experience a subdued week.

On the crypto side:

Last week, ETH experienced two significant price jumps, first from $1,930 to $1,990 and then from $2,020 to $2,120, drawing attention to the market. These rallies occurred after the Shapella upgrade, suggesting that the market had already priced in the fear of oversupply due to the unlock. ETH moved independently of BTC, which only saw a marginal increase above $31k after ETH’s second surge and remained relatively stagnant between $29.8-$30.8k throughout the week.

As a result of the ETHBTC trading at 0.07, BTC dominance fell from 48.8% to 46.6%. In recent weeks, as we previously mentioned, BTC’s rally was mainly due to a capital rotation in a “fight for quality” from alts to BTC. However, there is potential for positive momentum in alts now, and the downside risk is limited, as most altcoins are still in limbo; you can think of it as a BTC take-profit and high-beta trade.

On the charts, BTCUSD is well positioned in the support box above $29.3k, which is short-term support. If we break it, BTC could stabilise in the $28k area, with short-term resistance at $32k.

ETHUSD is currently testing the upper resistance at $2,170, and if it breaks, it could test $2.5k-2.6k. On the downside, short-term support is at $1,745.

As we move into a low-volatility regime, momentum is likely to fade, and prices may consolidate at the current levels.

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