TA Tuesday: Crypto Bounce-Back, Macro Trends, and Key Economic Events

Week-over-week performance:

  • BTCUSD: 62,989 / +3.33%
  • ETHUSD: 3,450 / +2.50%
  • US10Y: 4.44% / +20 bps
  • DXY: 105.93 / +0.45%
  • GOLD (USD/OZ): 2,327 / +0.13%
  • SPX: 5,475 / +0.49%
  • NDX: 19,812 / +1.73%
  • DVOL: 43.85 / -11.20%
  • VIX: 12.23 / -8.32%

Looking ahead – Economic calendar:

  • Tuesday, 2 July: EU CPI, Fed Chair Powell Speaks, US JOLTs
  • Wednesday, 3 July: US Holiday (early close), US ADP NF Employment Change, US Jobs, FOMC Meeting Minutes
  • Thursday, 4 July: US Holiday, CH CPI
  • Friday, 5 July: CH Foreign Reserves, US NFP, US Average Hourly Earnings, Fed Monetary Policy Report

On the macro side:

After a relatively quiet week, US PCE came in line with expectations, rising 2.6% year-on-year.
The major US indices were relatively flat, consolidating at all-time highs, while the VIX continued to trend lower on a weekly basis.

With US Independence Day on Thursday, I expect the market to remain quiet until Friday, when the always unpredictable US NFP report is released.
The NFP is expected to come in at USD 189,000, which is 30% lower than the previous figure. However, I expect the May figure to be revised.
Nevertheless, I anticipate significant market activity on Friday.

On the FX side:

The US Index has maintained its position in the upper 105 range and is approaching the year-to-date highs, while EUR/USD finds consensus between 1.07 and 1.078.

Chart 1: DXY 1d

Amid quiet weeks, the Swiss Franc (CHF) remains the funding currency ahead of Thursday’s Swiss CPI release.
Speculative futures positions in CHF versus USD are close to 10-year lows, indicating a large CHF short trade.
While the 30-day realised volatility (RV) for USD/CHF is at a median value of 8%, certain near-term factors could trigger an unwinding of this large speculative short positioning.
These factors include the upcoming French elections and the narrowing of the yield spreads in the second half of 2024 (e.g., the US 2-year vs. Swiss 2-year yield spread at 3.93%).
Nevertheless, the SNB will certainly take action if the CHF strengthens too much.

On the crypto side:

Crypto started the second half of 2024 with a bounce back as BTC/USD flirted with USD 63,000.

We saw two Solana (SOL) spot ETF applications, highlighting the outperformance of the Solana ecosystem.
However, I believe the likelihood of approval is low in the short term.
The SEC has explicitly stated that SOL is a security, and the lack of a regulated futures market, such as the CME contracts available for BTC and ETH, is a significant barrier to meeting market surveillance standards.
Nevertheless, this opens the door for positive events such as the potential launch of CME SOL futures, especially considering that Solana’s market cap is 17% that of Ethereum (this is a fat right-tail event).

For the ETH spot ETF, the SEC returned S-1 forms to issuers, who must re-file with minor amendments by 8 July, with trading potentially starting shortly thereafter.
As we approach the launch of this US regulated ETH vehicle, the Fed has claimed that the Lido and Rocket Pool staking programmes are securities and has sued over MetaMask’s staking service.
This has led to a decline in LDO and other re-staking products, while names such as ENS are trying to gain traction ahead of the launch of the ETH ETF (ENS market cap is USD 1 billion).
While not all regulation is clearly positive for crypto, I believe it is better than no regulation at all.
I appreciate the direction the SEC is taking in regulating crypto.

In derivatives, there is a notable divergence in demand for ETH upside optionality vs. BTC.
ETH wings are relatively steep as we are close to the local highs of March – are expectations here too high?
Nevertheless, ETH/USD has solid support at USD 3,250 and USD 3,000, with resistance at USD 3,500 and USD 4,000.

Chart 2: ETH/USD 4h

In BTC/USD, the RSI is a good bottom signal, but strong buying interest is only seen below USD 61,500, not at USD 63,000. I see three catalysts for BTC’s potential performance:

  1. ETH ETFs could trigger a BTC sell-off as institutions may switch from BTC ETFs to the new ETH ETFs.
  2. The Mt. Gox sell-off, although this is probably already priced in.
  3. BTC has been the crypto funding currency of late and has been heavily shorted to “fund” long positions in ETH and others. If ETH ETF inflows disappoint and/or ETHE outflows dominate, BTC could rally to USD 70,000.

Short-term support is at USD 59,000 and resistance at USD 63,000, followed by USD 67,000.

Chart 3: BTC/USD 1d

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