Market Deep Dive: Initial Jobless Claims, Hope for Rate Cuts, and BTC Surge Analysis

Last Friday’s Non-Farm Payrolls (NFPs) came in below expectations, causing the USD to decline and risk assets to rise. This fuelled hopes for earlier and additional rate cuts. Concurrently, negative funding rates last Thursday and Friday (late shorts trapped) created the ideal scenario for a squeeze higher. Additionally, with BTC ETF net outflows from last Thursday (only GBTC had outflows) being negligible, BTC swiftly surged above USD 60,000 just before the US market opened. It continued to rise over the weekend and peaked below USD 65,600 on Monday morning during the European session, largely driven by large short position liquidations.

With the Fed signalling steady rates ahead and no major macroeconomic news, BTC showed weakness throughout the week. Despite two days of strong inflows into BTC ETF on Friday and Monday, the figures for the last three days were insignificant. Accordingly, BTC drifted lower throughout the week, bottoming out yesterday morning above USD 60,600. Nevertheless, yesterday’s initial jobless claims came in above estimates (exp. USD 212,000, act. USD 231,000), fuelling optimism for further rate cuts in the future. Consequently, BTC has risen from its lows, surpassing the first resistance around USD 62,800, peaking just below USD 63,500, and currently trading above USD 63,000.

Personally, I do not see any strength in last week’s move, but rather some squeeze and FOMO chasing (sellers below USD 60,000, re-entering above) betting on a strong continuation of the bull market. The overall crypto market still looks weak in the short term. The first resistance for BTC is around USD 63,400, from where it can quickly move to USD 64,000 and then USD 65,600. In the short term, unless BTC is able to reclaim USD 64,000, I see this as a bearish sign where it will test the USD 60,000 level again. At the moment, we seem to be stuck between USD 60,600 and USD 64,000, and if BTC is not able to stay above USD 62,800 consistently, it will consolidate before the next leg down. Hence, the first support on the downside will be USD 60,600/USD 60,000, then USD 58,800, and next USD 56,500.

ETH sentiment remains weak, reinforced earlier this week when Grayscale withdrew its application for an ETH futures ETF just weeks ahead of an expected SEC ruling. ETH also peaked at around USD 3,220 on Monday, found support at USD 2,940 on Wednesday, and is now trading above USD 3,000. The first resistance is at USD 3,090, then USD 3,200, from where it can go to USD 3,350. On the downside, first support is at USD 2,940, then USD 2,820, and then USD 2,770.

On another note, BTC has diverged from the Nasdaq in recent weeks; as stocks have rallied, BTC has hit new lows. With the correlation between stocks and BTC back, is BTC perhaps leading the way for risk assets?

The 30-day BTC ATM implied volatility fell further from 53% to 49% (-4% WoW), while the 30-day ETH ATM implied volatility fell further from 58.5% to 56% (-2.5% WoW). Looking at the 25-delta skew, it is negative for BTC between the time frames of 0-30 days and for ETH between 0-60 days.

Yesterday, the BOE held interest rates steady at 5.25% as expected, while this morning’s preliminary UK GDP (QoQ) came in higher than expected (exp. 0.4%, act. 0.6%).

On the macro side, next week’s focus will be on US inflation data with US PPI and a Fed Chair Powell speech on Tuesday. US CPI and retail sales will be released on Wednesday, initial jobless claims and Philadelphia Fed Manufacturing Index on Thursday, and then EUR CPI on Friday.

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