TA Tuesday: BTC and ETH Decline Amid Broader Market Optimism

Week-over-week performance:

  • BTCUSD: 57,457 / -8.78%
  • ETHUSD: 3,077 / -10.81% (!)
  • US10Y: 4.28% / -16 bps (!)
  • DXY: 105.02 / -0.86%
  • GOLD (USD/OZ): 2,364 / +1.59%
  • SPX: 5,572 / +1.77%
  • NDX: 20,439 / +3.16% (!)
  • DVOL: 51.06 / +16.44%
  • VIX: 12.36 / -1.05%

Looking Ahead – Economic Calendar:

  • Tuesday, 09 July: Fed Chair Powell testifies, Treasury Secretary Yellen speaks
  • Wednesday, 10 July: RBNZ Interest Rate Decision, Fed Chair Powell testifies
  • Thursday, 11 July: DE CPI, US CPI, US Jobs
  • Friday, 12 July: US PPI

On the macro side: 

The macroeconomic outlook has been bullish and remains bullish.

Following Friday’s jobs report, which showed the unemployment rate rising to 4.1%, indicating a softening labour market, the market is pricing in a 74% chance of a rate cut in September.

Federal Reserve Chair Jerome Powell will testify on Capitol Hill this Tuesday and Wednesday.

Lawmakers from both parties are expected to press him on the possibility of interest rate cuts amid ongoing economic uncertainties.

Powell’s testimony is expected to cover the Fed’s outlook for inflation, employment, and economic growth, and these speeches are likely to be more relevant than the CPI itself.

The US CPI report will be released this Thursday at 2:30 PM CEST.

Powell has emphasised the need for additional data to determine if low inflation is a confirmed trend.

The CPI report will be crucial in determining whether a rate cut is warranted; however, a rate cut in July is not expected.

Major banks, including JPMorgan Chase & Co., Wells Fargo, Citigroup, The Bank of New York Mellon Corporation, and Unity Bancorp are due to release their earnings reports on Friday.

Last quarter’s better-than-expected earnings from the banks provided a significant boost to the stock market.

Investors are keen to see if this trend continues, as robust earnings could point to economic resilience and fuel further market optimism.

Against this backdrop, we saw the NDX rise an astonishing +3.16% WoW, a weaker USD, US Treasury yields fall 20bps, higher gold prices, and the VIX below 13.

All the stars seemed to be aligned, but crypto is missing the party – what is going on?

On the FX side:

As the likelihood of a US rate cut increases, the US dollar has reversed recent gains and the index is back at 105.

By and large, we have seen the G10 stronger than the USD and I expect this trend to continue.

Chart 1: DXY 1d

On the crypto side:

Tough times are hitting the crypto market again.

Is it time to be greedy when most are fearful?

The German government continues to liquidate Bitcoin holdings and Mt. Gox is distributing BTC, resulting in the largest daily liquidation since the FTX collapse.

If you have been caught off guard, you are not alone.

Large traders seem to be eyeing the USD 52,000 area to define their risk. Despite a choppy weekend with significant price swings, the market is trading higher.

On the derivatives side, we are seeing short term downside protection, but long term upside remains consistently bid.

Year-end put options are being sold at the USD 45,000 and USD 50,000 levels, while calls and call spreads are locked in the USD 65,000 to USD 100,000 range.

Implied volatility has drifted higher but remains in a nowhere zone, with BTC 7-day IV at 53v versus 7-day RV at 59v and EoY IV at 60v versus 170-day RV at 54v.

Perpetual funding remains sticky, suggesting that some traders are leaning short.

However, this could change quickly if market flows continue to the upside.

Heavily shorted names such as TIA and STRK are trading strongly, suggesting that some traders are closing out their shorts.

On the ETH ETF side, issuers filed the updated S-1 yesterday, although most omitted the fee schedule, as the SEC deemed it unnecessary at this stage.

Guidance from the SEC is expected soon, and once issuers have re-filed with the fee schedule, the launch could occur immediately thereafter. Eric Balchunas expects this to happen on 18 July.

Personally, I think the market is unprepared for the upside, with recent levels around USD 2,800 for ETH and USD 54,000 for BTC looking like potential turning points.

Chart 2: BTCUSD 1d

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