Week-over-week performance:
- BTCUSD: 58,681 / +3.23%
- ETHUSD: 2,302 / -1.67% (!)
- US10Y: 3.63% / -8bps
- DXY: 100.72 / -0.88%
- GOLD (USD/OZ): 2,579 / +3% (!)
- SPX: 5,633 / +2.96%
- NDX: 19,423 / +4.09%
- DVOL: 54.12 / -7.30%
- VIX: 17.14 / -11.92%
Looking Ahead – Economic Calendar:
- Tuesday, 17 September 2024: US Core Retail Sales
- Wednesday, 18 September 2024: UK CPI, UK PPI, EU CPI, FOMC interest rate decision, Token2049 starts, Sky [MakerDAO] to launch its new SKY governance token and USDS stablecoin
- Thursday, 19 September 2024: BoE interest rate decision, US jobless claims, Solana Breakpoint event starts, Terraform Labs’s Chapter 11 bankruptcy reorganisation hearing
- Friday, 20 September 2024: BoJ interest rate decision, DE PPI
- Saturday 21 September 2024: Final SEC decision deadline for Bitcoin ETF Options is 21
On the macro side:
It is a busy week, with the Fed’s interest rate decision being the main focus. The debate has shifted towards a 50 bps rate cut, with a 67% probability now in favour of the larger cut. This marks the first time in years that there is real uncertainty surrounding the Fed’s move.
Bloomberg Economics notes: “We believe Fed Chair Jerome Powell supports a 50-basis point cut. However, the lack of a clear signal from New York Fed President John Williams before the pre-meeting blackout suggests Powell may not have the full support of the committee.”
Last week, US CPI continued its downtrend to 2.5% YoY, but core inflation remained sticky at 3.2% YoY, largely driven by slower to adjust housing costs. The USD softened since then and the US 1-month treasury yield is trading 45 bps lower.
Precious metals have rallied significantly, and I believe this has been the key driver of the bitcoin rally, while other cryptocurrencies have failed to follow suit. Traditional risk assets performed well week-over-week, with sharp intraday volatility.
While the 50 bps cut seems mostly priced into FX, bonds, and precious metals, equities and equity volatility do not seem to have fully reflected it yet. I see the 50 bps cut as a potential “recession signal” that could negatively impact equity prices; until BoJ rate decision, it is going to be an uncertain week.
On the FX side:
The DXY is back in the 100s and the EURUSD is printing a lower high. This is overall bearish for risk assets.
All eyes on the FOMC.
Chart 1: DXY 1d
On the crypto side:
The market continues to be BTC-dominated. BTC dominance is rising, which makes sense as it is seen as the high quality asset in a war of quality. Regulatory uncertainty around DeFi, coupled with a general lack of DeFi activity, is further reinforcing this trend.
Inflationary pressures and lower yields are driving gold and precious metals higher, which supports the bitcoin narrative. This becomes even more relevant in a potential Kamala presidency, where crypto projects outside of BTC and ETH are unlikely to thrive. However, without DeFi innovation and capital inflows, BTC remains the clear winner.
That said, crypto sentiment can shift quickly. Events such as Token2049 and Solana Breakpoint are worth following, as they often highlight emerging trends. Historically, Solana Breakpoint has been a catalyst for strong SOL performance.
In derivatives, basis trading remains steady at +/-2 bps daily across all markets, with traders positioned for continued ETH underperformance relative to BTC. ETH skews are more negative through early November, while implied volatility remains high, making short vol trades appealing.
In the spot market, BTCUSD finds its first support at $57.5k, with $58.5k acting as a magnet. A break above $60.5k could retest $63k, while a break below $57k could push prices to $55k or $52k.
Chart 2: BTCUSD 1d
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