TA Tuesday: BTC and ETH struggle

BTC and ETH struggle; SEC’s ETF approval decision looms.

Week-over-week performance:

  • BTCUSD: 27,405, -7.76%
  • ETHUSD: 1,826, -13.21%
  • US02Y: 4.06%, -14 bps
  • DXY: 101.43, -0.45%
  • GOLD (USD/OZ): 1,994, -0.25%
  • NDX: 13,087, -0.90%
  • VIX: 17.6, +3.9%
  • VVIX: 94, +13.25%

On the macro side:

In terms of macro, we are expecting to see the release of the PCE figures and Q1 “Employment Cost Index” on Friday.

The Federal Reserve officials have hinted that they might increase the Fed funds rate at their upcoming meeting in May, potentially bringing it just above 5% before pausing.
The market probability of the rate hikes suggests an 87.2% chance of a 25 bps hike and a 12.8% chance of no hike (please see Chart 1).

Chart 1: Target rate probabilities for 3 May 2023 Fed Meeting

Currently, market participants are not pricing in any further hikes, with the first rate cut expected in September (see Chart 2).

Chart 2: Target rate probabilities for 20 September 2023 Fed Meeting

In addition to these trends, the SEC’s regulatory enforcement actions are also in the news.

Grayscale has submitted an application for an ETF product to the SEC, which will be decided upon next month. Approval of the ETF would have a positive impact on crypto prices and quickly eliminate the discount on the Grayscale Bitcoin Trust, which is currently trading at a 39.65% discount vs. physical bitcoin
(see Chart 3).

Chart 3: GBTC Discount or Premium to NAV

On the crypto side:

Bitcoin has been struggling to maintain its position above $30k, and is now trading at the same level as it was 30 days ago. With the RSI in the 40s, BTC may consolidate at these levels. Major support is at $25.2k, while major resistance is at $29.2k.

Similarly, Ethereum has been unable to break through the $2.2k mark, which was last seen on May 22nd. ETH’s RSI is moving in tandem with BTC, and it may find support at $1.7k, with resistance at $2.2k.

On the derivatives side, traders are betting on momentum fading with BTC ATM (At-The-Money) term structure in full contango, and trading at 49% for the 30-day tenor, while 30-day RV (Realized Volatility) is at 40% (please refer to Chart 4).

Chart 4: BTC ATM Implied Volatility (src. laevitas.ch)

Similarly, the skew (P-C) has moved back into positive territory, as traders sell calls for yields and buy puts for protection.

Long-term options have been bid on in particular recently, with both low-delta calls trading at a premium to low-delta puts (10d RR: 4.81%) and the wings being particularly expensive (10d BF: 8.48%). This scenario presents interesting trading opportunities, such as selling the wings (10-delta) and buying the body (ATM) or the risk reversal.


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