After the predominantly sideways trend last week, the cryptocurrency markets have continued their upward trend this week. BTC moved in a range between $34,500 and $38,000, hitting a low on Tuesday and a high for the week on Thursday afternoon. ETH saw a broader movement, falling to a low of $1,852 on Tuesday and rising to a high of $2,136 on Thursday. The rally was fuelled by news that BlackRock had registered an Ethereum trust, a move seen as a precursor to an ETH ETF. This announcement catalysed a rally that saw ETH hit $2,050 before settling down, only to spike again around the close of the US/Asia open, marking a seven-month high.
BTC’s price action this week was also notable, as it surpassed $37,000 – an 18-month high – amid optimism surrounding the potential approval of spot BTC ETFs in the US. The cryptocurrency peaked at $38,000 in early Thursday afternoon, followed by a sharp drop to $35,700. However, it has since recovered and is currently hovering around the $36,500 mark.
The ETH/BTC ratio has risen from 0.0525 last week to 0.0575 this week, supporting the BTC to ETH and altcoin rotation narrative. At the same time, the bitcoin dominance ratio has fallen to around 52.30%, the lowest since 23 October. Looking at the volatility numbers, BTC’s 30-day implied volatility has slightly decreased to 54% (-1% WoW), while ETH’s has significantly increased to 61% (+9% WoW) compared to last week. The 25 Delta Skews of ETH and BTC have shifted from last week’s overall positive outlook to a mixed sentiment of short-term bullishness and long-term bearishness, as evidenced by the shift to negative skew in timeframes beyond 60 days. Market makers appear to be taking advantage of short-term volatility while unwinding longer-term positions in a classic play to exploit short-term price action amid a cooler long-term view.
Furthermore, the latest market data shows that CME’s BTC futures open interest has surpassed that of Binance, indicating growing institutional interest, likely linked to the prospect of a spot ETF approval. Meanwhile, perpetual swap funding rates remain elevated, with Thursday’s significant volatility resulting in over $435 million in liquidations, the highest single-day total since the August crash.
On the macro side, Wednesday’s data release showed that German CPI for October was in line with expectations, remaining steady MoM with a 3.8% YoY increase.
On Thursday, Jerome Powell’s assertive remarks, coupled with a disappointing 30-year bond auction, dampened market optimism, causing yields to spike and halting the progress of this week’s strong equity indices. Powell stated that central bank officials are not confident that current interest rates are high enough to effectively control inflation. In addition, he indicated that further improvements in the supply of goods, services, and labour may not significantly aid this effort.
This morning, UK GDP growth came in at a better-than-expected 0.6% YoY (exp. 0.5%), while this afternoon all eyes will be on ECB President Lagarde’s speech. Another interesting figure to watch will be the US Michigan Consumer Sentiment Index this afternoon.
Looking ahead to next week, key economic events include US Core CPI (MoM/YoY) and Japanese GDP on Monday, UK CPI (YoY), US (Core) Retail Sales and PPI on Thursday, and finally EUR CPI (YoY) and US Building Permits on Friday.
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