Last Friday, BTC continued its sell-off, weakened by the “buy the rumour, sell the news” narrative, the significant outflows from the Grayscale Spot ETF, and the shift towards altcoins and other asset classes. BTC fell from $46,000 at midday, plunging to below $41,500 after the US session, before recovering slightly to around $42,500. Over the weekend and into last night, BTC traded in a tight range between $41,700 and $43,600, with its lowest and highest levels on Monday and Wednesday nights, respectively. Yesterday, BTC’s post-ETF weakness continued, dropping to $40,600 before recovering slightly overnight to trade below $41,500. The first support is at $40,800, with a critical threshold at $40,000, a breach of which could lead to a quick fall to $38,000, possibly even $35,000. Nevertheless, I am leaning towards BTC holding above the $40,000 level. A break below this level could trigger a rapid decline. Conversely, if it holds above this range, a rise to $45,000 is plausible. That said, the market may remain range-bound for the next few weeks/months until the halving in mid-April due to mixed sentiment and the fact that GBTC spot selling pressure is not over yet. While I am long-term bullish, I do not see any immediate catalysts, barring significant ETF inflows or global liquidity/macro data, to push BTC above $45k anytime soon.
ETH sentiment continues to be stronger, having topped $2,700 last Friday afternoon. However, it was later pulled down to the $2,450 level by BTC, and fluctuated between $2,450 and $2,600 throughout the week. ETH briefly broke above this range on Tuesday evening. Yesterday, ETH briefly fell below $2,450 to $2,420, but soon returned to its usual range and is now trading above $2,450. The $2,400 level provides strong support, while $2,700 acts as resistance. A break below $2,400 could lead to a rapid decline with the next support at $2,250. Meanwhile, the ETHBTC ratio remained within a range of 0.0585 to 0.06 this week.
In terms of volatility metrics, bitcoin’s 30-day ATM implied volatility continued to decline and is now at 44% (-13% WoW; ~ -22% post ETF announcement), as is ETH’s at 44% (-15% WoW; ~ -25% post ETF announcement). The 25-day delta skewness was a correct indicator for last week and remains negative (indicating a bearish outlook with more puts sold than calls) for timeframes ranging from 0 to 60 days for BTC and 0 to 90 days for ETH.
On the macro side, German December CPI came in line with forecasts this week at 3.7% YoY, up from 3.2% YoY in November. Eurozone CPI on Wednesday was also in line with expectations at 2.9% YoY. US Retail Sales for December beat forecasts, rising 0.6% MoM versus expectations for a 0.4% MoM increase. On Thursday, the Philadelphia Fed Manufacturing Index came in lower than expected – at 10.6, down 3.6 points. On a positive note, US Initial Jobless claims came in lower than expected – at 187K vs. the forecast of 207K, providing a boost to US stocks along with the US Dollar Index, which reached 103.7 (currently around 103.4), which is a gain of more than 2% WoW.
Looking ahead, key economic events next week include the Bank of Japan’s interest rate decision on Tuesday, the European Central Bank’s interest rate decision on Thursday, and the release of the US Core PCE Price Index data on Friday.
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