Market deep dive: Global macro environment continues driving the market price action

BTC$ and ETH$ continue to trading in a relatively tight range. Since the lows three weeks ago, when BTC$ dropped below 18k and ETH$ below 900, both bitcoin and ethereum are in a range between 18.5-22k and 1-1.3k, respectively. Since last week ETH (+13.2%) recovered alongside BTC (12.4%), and both are currently trading close to the upper bound of the range.

The high correlation between cryptocurrencies and risk-on assets, such as the NDX (+4.7% since a week ago) is still apparent, and the global macro environment remains a key driver for any price action. However, to see crypto breaking out on the upside, the dust of all recent events needs to settle (UST, Celsius, 3AC, ..), and the market needs to regain confidence that there are no more corpses in the cellar.

National banks around the globe no longer seem to be competing to devalue their currencies to have a comparative advantage for their export industries. In 2022, with rising inflation, it seems rather preferable to have a strong currency as it makes imports less expensive and hence dampens inflation.

One player who seems to be keen to win this race is the Swiss National Bank as they unexpectedly hiked rates by 50bps three weeks ago.

Interestingly, there is also a change in trend in the SNB Sight Deposits as they dropped by 5.6bn CHF compared to the level one month ago. Sight Deposits are usually a good proxy for FX interventions of the SNB. Although some analysts point out that it is unlikely that the SNB is actually selling foreign currency to strengthen the Swissie (Sight Deposits can move for a variety of reasons), it is highly unlikely that they are currently trying to weaken it.

Looking now at the big player: the ECB seems to be losing the fight against the FED. While the market expects another 75bps hike to 2.25-2.5% in the US at the end of July, the ECB still needs to deliver on its promise: a first hike of their policy rate, which is still in negative territory.

With the ECB struggling to keep inflation under control, the common currency is trading below 1.02 against the USD, a level not seen since 2002.

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