Market Deep Dive: BTC and ETH Rally Amid Volatility, SEC Developments, and Global Economic Factors

After last Friday’s good news regarding the SEC’s decision not to challenge the Grayscale ruling, BTC and ETH experienced a decent rally over the weekend, after a mostly downtrend in the previous weeks. The positive trend continued through the start of the week, but there was a major price shock on Tuesday, with a false tweet from Cointelegraph claiming that the SEC had approved BlackRock’s iShares Spot Bitcoin ETF. The fake news was largely Futures driven, sending BTC to over $30k on several exchanges before returning to around the $28k range.

On a positive note, even after the fake news was cleared, BTC remained elevated and didn’t return to its previous range from earlier this week. Therefore, dismissing the price spike from the fake news, BTC trended from $27,300 on Monday to $29,346 at the time of writing and it looks like the trend can go higher. Even though the SEC case against Ripple is not over yet, the SEC’s announced withdrawal from the case against Ripple CEO, Brad Garlinghouse, and Executive Chairman Chris Larsen, as well as a weaker USD on Thursday (new highs for nominal and real 10yr Treasury yields; after Biden pledged at least $100bn in support for Israel) gave the cryptocurrency market further momentum.

Looking at ETH, it’s clear that BTC is currently dominating (ETH/BTC ratio -5.8% WoW; currently around 0.054). ETH tested the $1,540 mark twice on Thursday night, wiping out even the previous weekend’s gains. At the time of writing, ETH is trading below $1,590 and has largely maintained a range between $1,540-$1,600 this week, except for Tuesday’s fake news spike.

On the macro side, rockets hit a Gaza hospital on Tuesday, with Israel suggesting Hamas involvement, while US sanctions on chip exports to China led to a big sell-off in Nvidia stocks. In addition, US Core Retail Sales (MoM) came in at 0.6%, better than the expected 0.2%.

On Wednesday, China’s Q3 GDP rose by 4.9% YoY, beating expectations, while the UK posted the highest inflation rate among developed economies at 6.7%, suggesting further interest rate hikes may be on the way. Eurozone CPI (YoY) came in at 4.3% in September, in line with estimates, while US Building Permits were slightly higher than forecasted (exp. 1.455M, act. 1.473M).

On Thursday, Tesla shares fell over 9% post-earnings, while Netflix surged by 16% on the back of new subscribers. Jerome Powell’s speech hinted at the possibility of further rate hikes due to the robust economy and tight labour markets, even after last year’s aggressive increases. Markets reacted with equities falling, yields approaching 5%, and the USD Index falling to 106.30.

The situation for risk assets and crypto markets remains uncertain due to tensions in the Middle East, high yields, and US politics. Looking ahead to next week, key economic events include US PMI data on Tuesday, ECB interest rate decision, and US GDP (QoQ) on Thursday, as well as US Core PCE (YoY, MoM) data on Friday.

A quick look at the volatility landscape shows that BTC’s 30-day at-the-money implied volatility has risen to 34% (+5% WoW), while ETH’s has remained flat at 30% (0.3% WoW). Following the false Bitcoin spot ETF approval news, there’s a noticeable bullish sentiment with traders favouring calls over puts (BTC’s 7- to 180-day 25-delta skewness all positive), signalling the market’s anticipation of the ETF’s eventual launch and potential institutional investment.

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