TA Tuesday: Last week was action packed

Last week was action packed with FOMC, Megacaps Financials reporting, US Jobs, and ETH Shanghai updates.

  • BTC: USD 22,896 (+0.27% WoW)
  • ETH: USD 1,631 (+4.11% WoW)
  • SOL: USD 23.16 (-3.34% WoW)
  • Crypto Total Market cap: USD 1.016T (+2.52% WoW)

On the macro side:
On Wednesday, the FOMC saw a 25 bps hike and sent the markets risk-on. Nevertheless, when I go through the word-by-word release there are some statements that I find particularly interesting, as highlighted in the image (Fig 1):

FOMC Statement

  1. Inflation has eased somewhat but remains elevated.
  2. There is elevated uncertainty.
  3. The committee anticipates that ONGOING INCREASES […] will be appropriate.
  4. The committee will continue reducing its holdings […] as described in its previously announced plans.

Then, on Friday US Job Numbers arrived way hotter than expected with NFP at 517k vs. exp. 185k, and unemployment at 3.4%, but risk assets did not really retrace back, just USD inched higher with DXY now at 103.57 (+1.46% WoW).

The DOT-PLOT still sees by End of Year the target rate at 475-500 bps (meaning one 25 bps hike), while median projection are 500-525 bps and US 2Y Yield is at 4.423% (+22.5 pcts WoW). This has not changed much.

To me, the market seems too optimistic so far and not really pricing the fact that the Fed will maintain interest rates at 5-5.25% (for longer) unless the strong labour market leads to increased wages and inflation (i.e. unemployment >4%).

Nevertheless, you always need iron balls to bet against the market as “Markets can stay irrational longer than you can stay solvent.”

All eyes are now on Powell’s speeches and the Valentine’s Day CPI release.

On the TradFi side:
Megacaps ($META, $AAPL, $GOOG, $AMZN) reported their financials last week, and one thing was clear: investors like FCF. Most of the companies are seeing revenue growth deceleration and are very focused on stock buybacks. Investors are cheering for cost cutting (just look at $META: +52% YTD).

Extending these concepts to digital assets, I believe that companies/foundations/projects that rethink their business models, focus on delivering projects, cutting costs, and buying back their tokens, will find some fertile ground.

On the crypto side:
Correlations across the board have started decreasing, with alts trying to find their own path.

On the derivatives side:

  • ATM IV term-structure is back to contango for both BTC and ETH. BTC 7-day trading 49v and ETH at 64v, while 90-day at 52v for BTC and 65v for ETH. VRP keeps being large, especially in the short-term: 7-day BTC VRP: 23v and 30v for ETH. Should the spot price keeps being range bounded the both the term-structures are going to be more steep, leaded by 7-day and 30-day dropping. As last week, as long as BTC and ETH do not break clear supports and resistances, I am a better seller of volatility. If there is a break above $25k for BTC and $1.7k for ETH, I would better go long delta, and a break below $22.5k for BTC and $1.5k for ETH I would better go short delta. (fig 2, 3)

BTC atm IV

ETH atm IV

  • 25-delta skew (put minus call) faded into positive territory, and we are now trading close to the historical median values for most of the expiries. This is fair to me, as I won’t get any directional bet on the market at this stage. (fig 3, 4)

BTC 25d skew

ETH 25d skew

On the spot side:

  • It is gold cross time for BTC! 50-day MA just crossed the 200-day MA at USD 19,800; this has historically always been the case for a BTC bull run. Nevertheless, the price is currently trading way above the cross, also RSI is still at 60, but is heading towards neutrality. Therefore, I would expect to see some consolidation above $20k.

Happy Trading!

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