TA Tuesday: Crypto Assets Remain Stable Amid Geopolitical Tensions

Week-over-week performance:

  • BTCUSD: 27,649 / +0.15%
  • ETHUSD: 1,588 / -4.68%
  • US02Y: 4.98% / -13bps
  • DXY: 106.17 / -0.94%
  • GOLD (USD/OZ): 1,858 / +2.14%
  • NDX: 15,047 / +1.42%
  • VIX: 17.69 / +0.51%

On the macro side:

The previous week brought robust US job figures but also saw heightened tensions in the Middle East, as Israel officially declared war on Hamas following a surprise attack.
Despite oil and gold seeing an immediate uptick, defensive stocks, the US dollar, and VIX have yet to follow suit.

This could suggest that investors are comfortable with their current positions. However, it might also be a case of delayed and underreaction.
As we approach other significant macro events, the potential pain trade lies in long-volatility, with war updates and clarity from the FOMC minutes serving as catalysts.

Looking forward:

Wednesday will feature German CPI, US PPI, and FOMC meeting minutes.
Thursday will bring US CPI and US jobless claims into focus.

On the FX side:

The US dollar rally looks to have finally peaked.
And this has come with the Israeli war announcements (which should push the dollar higher).
As we head into the release of the FOMC minutes, we could potentially get some clarity on the US Policy rates (which should push the dollar lower); counter-effects may serve to stabilise the US dollar.

In terms of price: I expect some consolidation in DXY around 106. A break to the downside could see DXY around 105 again.

I see more volatility in the EURUSD pair, trading around 1.0478/1.0594, and USDCHF heading to 0.9018 in a low-volatility environment as USD and CHF stand as safe-haven assets.
A softer FX environment should help crypto assets find their own path.

Chart 1: DXY 1d

On the crypto side:

Week after week, two discernible trends persist: a state of low volatility and the continued strength of BTC.
The prevailing low volumes lead me to interpret this as a sign that “fresh capital is absent from the markets.”
In the absence of new capital, the market dynamics end up revolving around capital rotation (shifting from crypto A to crypto B) or outright selling.

In this market scenario, BTC stands out as the most stable asset, yet the potential trigger for equities could induce volatility in the crypto sphere.
Examining derivatives, BTC volatility is consistently pricing higher than ETH volatility.

Similarly, the relative skew consistently prices ETH downside volatility higher than that of BTC.
Within derivatives, I see a good edge in ETH convexity trades (put spreads) and long-volatility (calendar spreads, financing short-term long with long-term short).

On the spot side, I expect BTC to consolidate within the range of $26.9k and $28.7k.

Chart 2: BTCUSD 1d

Turning to ETHUSD, I foresee potential movements, suggesting a downward shift to $1,485 as a strong entry point as we follow the double top, especially if we breach the $1,563 support.
On the upside, resistance is expected at $1,667.

Chart 3: ETHUSD 1d

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