Market Deep Dive: BTC Holds Strong Amid Volatility, FOMC Impact, and Institutional Moves

After last week’s strong rally, this week has been a rather choppy one for the BTC crypto markets. BTC traded in a range of $33.95k to $35.95k this week, flirting with $36k on Thursday. It saw a correction later in the day and is now trading around $34,500, with the $34k level proving to be a solid support throughout the week. Meanwhile, ETH traded in the $1,775-1,875 range this week, touching $1,875 on Thursday evening before retreating back to the $1,800 level.

Thursday’s spike was not driven by any relevant crypto news, but rather by US macro factors such as a dovish FOMC and a lower-than-expected Q1 Treasury supply estimate. The Federal Reserve kept interest rates on hold at 5.50%, with Powell signalling a potential pause in aggressive tightening, stating that the slowdown will give the Fed a better sense of how much to hike if it needs to raise rates further. As a result, US yields fell (US 2-year yield at 4.93%; the lowest since 8 September), sending risk assets higher. Therefore, a continued dovish stance would further support the momentum of the crypto markets by attracting additional flows from investors looking to maximise their beta exposure.

Bitcoin’s market dominance remains robust, with a slight dip from 54% to 53.65% last week. The market rotation from BTC to ETH and other altcoins mentioned last week has not yet materialised in the broader market. A possible reason for bitcoin’s continued dominance could be new investors’ preference for bitcoin, while veteran crypto traders are gradually shifting profits, possibly waiting and preparing to invest in altcoins. On another note, the CME is now a major player in the bitcoin futures market, a close second to Binance’s leadership, sparking discussions about the level of institutional investor interest in crypto markets.

On a more bearish note, the 30-day Relative Strength Index and the Momentum Reversal Indicator are flashing sell signals. In addition, on-chain metrics such as the 30-day Market Value to Realised Value (MVRV) also point to a potential sell-off. A quick look at the volatility numbers shows that BTC’s 30-day at-the-money implied volatility has risen further to 55% (+4% WoW), while ETH’s has risen to 52% (+6% WoW). Looking at the 25-delta skewness of BTC and ETH, we can still see positive numbers across all time frames, indicating bullish sentiment.

Other crypto news includes the official postponement of Mount Gox’s 138,000 BTC repayment to creditors from October 2023 to October 2024, easing short-term market concerns. In addition, former FTX CEO Sam Bankman-Fried was convicted on all seven charges in yesterday’s trial.

On the macro front, markets were largely awaiting Wednesday’s FOMC meeting. However, on Tuesday, Eurozone CPI (YoY) came in slightly lower than expected (exp. 2.9%, act. 3.1%), while GDP growth (YoY) underperformed, coming in at 0.1% versus the forecast of 0.2%.

On Thursday, the Bank of England also kept interest rates on hold at 5.25%, following the Fed’s wait-and-see approach. Coinbase held its earnings call and beat Q3 revenue expectations despite a significant drop in trading volumes to $11 billion. This led to a 4% drop in the share price post-earnings amid ongoing SEC litigation. Apple’s earnings beat expectations, but the company forecast a modest holiday sales outlook due to lower demand for iPads and wearables, leading to a 3% share price decline in after-hours trading.

Eyes were on EU unemployment figures this morning, followed by US non-farm payrolls in the afternoon. Looking ahead to next week, key economic events include European Retail Sales (YoY) and German Harmonised CPI (YoY) on Wednesday, and China CPI (YoY) on Thursday.

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