Market Deep Dive: ETHBTC Outperformance and CPI Sentiments


With last week’s positive BTC ETF inflows, retail traders were expecting a bullish week ahead. The BTC price surged from USD 67,500 on Saturday morning to just under USD 70,300, before retracing on the CME opening to USD 69,000 and consolidating well above this range during Asia’s Monday session. On Monday, BTC then rose unexpectedly to above USD 72,750 ahead of the US session with rumours in the market that the strong spot BTC buyer on Binance was related to Ethena. Traders may have taken the heavy buying as a breakout signal and pushed the price higher. As Ethena’s strategy is market neutral and they are playing the standard basis trade (buy spot short perp) in order to create a synthetic stablecoin position, it should not move prices. However, if Ethena gains further traction and size, the strategy could cause price movements in both directions when they quickly have to open or close positions (systemic risk?). Additionally, playing the basis keeps funding rates lower for ETH and BTC (check USDe market cap for the impact), which could be healthy for the crypto market per se.

Ahead of Wednesday’s US open, prices fully retraced to the weekend lows, testing USD 67,500 as US CPI came in slightly above expectation. From that point, the price then retraced to highs around USD 71,300 both yesterday and this morning. The USD 71,300 mark represents the first resistance level and the second is at USD 72,800, above which USD 75,000 could be reached quickly. On the downside, USD 67,500 marks the first support level, the second at USD 64,500, and if it loses this level, it should find significant support at the USD 60,000 level (strong spot demand). I am, however, more inclined to think that we will see a new ATH before we see the lower USD 60,000 levels.

Conversely, last Friday’s ETHBTC level of 0.048 proved to be a solid floor as in January, reaching highs of 0.052 on Tuesday and currently trading below 0.05. ETH pushed 100 points from USD 3,300 to around USD 3,400 over the weekend and led Monday’s rally instead of BTC. The outperformance can be attributed to Vitalik’s speech at a Web3 event in Hong Kong on Tuesday (and Ethena’s spot buying on Monday?). ETH peaked around USD 3,730 on Tuesday, tested Monday’s low (above USD 3,400) on Wednesday, and is currently trading above USD 3,500. The first resistance level is therefore this week’s high, from where it can quickly rise to USD 4,000, while on the downside the first support level is USD 3,400 and then USD 3,200, from where it could quickly dip to USD 3,000.

The 30-day BTC ATM implied volatility fell further from 70.7% to 66.4% (-4.3% WoW), while the 30-day ETH ATM implied volatility fell from 70% to 67.5% (-2.5% WoW). Looking at the 25-delta skew, it remains negative for BTC for timeframes between 0-30 days and for ETH between 0-60 days (no May spot ETF fully priced in), indicating near-term bearishness and medium to long-term structural bullishness.

On the macro side, US CPI came in slightly higher than expected at 0.4% MoM vs. forecasts of 0.3%. Accordingly, this had some impact on the anticipation of interest rate cuts with traders now pricing in a 93% probability that the FED will keep interest rates at the same level as now at the next FOMC in May.

Yesterday, as anticipated, the ECB held interest rates at the same level, and March’s US PPI confirmed a smaller than expected increase (exp. 0.3% MoM, act. 0.2% Mom), easing CPI-driven sentiment and sending US equities slightly higher.

Today, UK GDP and German CPI came in line with estimates, and the key economic events to watch next week are US Retail Sales on Monday, China GDP on Tuesday, UK and EU CPI on Wednesday, and the Philadelphia Fed Manufacturing Index on Thursday.

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