Making headlines this week is the resignation of Binance CEO Changpeng Zhao after he pleaded guilty in a US court to violating the Bank Secrecy Act. Binance has admitted to violating anti-money laundering laws in the US and has agreed to pay a fine totalling approximately $4.3 billion. This development marks a significant change in leadership at one of the world’s largest cryptocurrency exchanges. The announcement led to a moderate market reaction, with a slight downturn in cryptocurrencies.
Zhao was released on a $175 million bond with strict conditions, including remaining in the US. At the same time, Binance saw net outflows of more than $1 billion within 24 hours of the news.
All in all, the resolution of Binance’s issues is a positive development for the cryptocurrency market, allowing attention to shift towards the expected approval of a BTC spot ETF and the upcoming BTC halving event next year.
This week has been rather choppy, with BTC briefly dipping to $35,650 on the Binance news, before recovering and currently trading in the $37,500 range, with $38,000 as the first resistance level to be breached. Currently, investors seem to be moving into ETH and altcoins as BTC approaches the $38,000 level. ETH has been outperforming BTC, with the ETHBTC ratio rising from 0.053 to 0.056 WoW. Following the Binance news, ETH briefly dipped to a low of $1,930 on Tuesday, around the range seen last Friday, before rallying strongly to trade above $2,075.
Turning to volatility figures, bitcoin’s 30-day implied volatility fell further to 48.5% (-3.5% WoW) and Ethereum’s also fell to 49% (-6% WoW). The 25-delta skewness of BTC options shows a sharp decline in front-end option skewness following Tuesday’s market decline, even briefly crossing the zero line, while a significant recovery on Wednesday led to a vertical rise. The current positive skewness across all time frames is down from last week, but still points to further bullish sentiment in the market, with Wednesday’s rise in 30-day expired options suggesting that traders are favouring BTC’s upside potential over downside protection.
Due to ETH’s strong performance this week relative to BTC, ETH’s skew over time is less steep relative to BTC, but still very positive and bullish. At the same time, Binance experienced over $1 billion in net outflows in the 24 hours following the news amid regulatory settlements and Zhao’s legal developments.
This week’s macro focus was on the release of the FOMC meeting minutes on Tuesday. Markets interpreted the Federal Reserve’s latest communications as more dovish. In particular, the 10-year US government bonds fell from 4.5% to 4.36% during the week, before climbing back above 4.45%. In addition, the 10-year US Treasury yield has fallen sharply from its recent high of just over 5.0%, accompanied by a similar decline in the 10-year TIPS yield from 2.54% to 2.2%. These moves reflect lowered expectations for future federal funds rates.
On Wednesday, US initial jobless claims fell to 209k, below expectations of 225k and the previous week’s figure of 233k. In addition, US durable goods orders fell sharply by 5.4% MoM in October, in stark contrast to the 4.0% increase reported in the previous month. This data reinforced market expectations of further rate hikes, pushing the Nasdaq above 16,000: its highest intraday level of the year. At the same time, the S&P 500 closed just 1% below its annual high.
US markets were closed on Thursday for the Thanksgiving holiday. The November HCOB Eurozone Manufacturing PMI rose to 43.8, the highest in six months and above expectations (exp. 43.4), pointing to a modest recovery in the sector. In addition, the Services and Composite PMIs came in slightly above consensus forecasts at 48.2 and 47.1, respectively. Nonetheless, this recent upturn contrasts with ongoing challenges such as continued production declines, significant job cuts, and reduced purchasing and falling output prices, reflecting persistent demand and cost pressures despite a slight uptick in confidence.
This morning saw the release of Germany’s final Q3 GDP figures, which confirmed an expected contraction of 0.1%. Traders will now await the US open and the release of the US services PMI data for November.
Next week’s key economic events include US Building Permits on Monday, US CB Consumer Confidence on Tuesday, German CPI (MoM) and US Q3 GDP on Wednesday, followed by Chinese Manufacturing PMI, Eurozone CPI (YoY) and US Core PCE Price Index (YoY and MoM) on Thursday, concluding with ISM Manufacturing PMI/Prices on Friday.
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