TA Tuesday: BTC and ETH Surge, Macro Insights, and Market Predictions

Week-over-week performance:

  • BTCUSD: 66,490 / +18.31% (!)
  • ETHUSD: 3,689 / +14.35% (!)
  • US10Y: 4.19% / -9bps
  • DXY: 103.94 / +0.18%
  • GOLD (USD/OZ): 2,115 / +4.03% (!)
  • NDX: 18,226/ +1.63%
  • VIX: 13.48 / -1.82%

On the macro side:

Last week, US PCE came in line with expectations and Fed Governor Waller (voter) expressed his desire to reduce the central bank’s MBS holdings to zero while shifting its Treasury holdings to shorter-term securities to better match its policy rate.
This strategic move could streamline future asset purchase programmes by allowing the Fed to naturally reduce its balance sheet as short-term securities mature, without further expansion.
This has definitely helped gold and risk assets rally higher.

This week holds significant macroeconomic releases. 
Any unexpected negative surprises, such as dovish remarks from Powell or higher-than-anticipated US Non-Farm Payrolls (NFP) are likely to push risk assets lower.
My bias remains that risk assets are not done yet, and I will consider these retracements as good entries.

Looking ahead:

  • Wednesday 6 March: BoC Interest Rate Decision, Powell Testifies, JOLTs, Beige Book
  • Thursday 7 March: SNB Foreign Reserves, ECB Interest Rate Decision, US Jobless Claims, Fed’s Balance Sheet
  • Friday 8 March: EU GDP, US NFP, US Unemployment rate

On the FX side: 

The EURCHF has successfully regained the 0.96 mark, while the DXY continues to fluctuate below 104.27. 
As we approach a pivotal week for foreign exchange markets, I prefer to maintain a neutral position on the euro ahead of the ECB’s interest rate decision.

Nonetheless, I firmly believe that the ECB’s influence over its currency has diminished considerably and that it will likely follow the Fed’s decisions. 
Therefore, I do not expect anything out of the ordinary from the ECB’s upcoming announcement.

If both the EU GDP and the ECB interest rate decision are in line with expectations, and if the SNB once again demonstrates a robust buying interest in foreign reserves, I will reaffirm my stance for a weaker CHF and a stronger EUR.

Meanwhile, the USD’s consolidation in the DXY index continues to bolster risk assets.

Chart 1: DXY 1d

On the crypto side:

We have almost reached the bitcoin all-time high in USD terms and it still feels like when we were at USD 50,000 in October 2021, it has definitely never felt this good in crypto.
Back in 2021, when we were going for the ATH, we all felt the leverage in the market and everyone has the same thought in their head when they buy bitcoin et al. “There is no new capital coming in, it is all leverage”.
Now we have the Wall Street capital, and it seems promising.

The total market capitalisation of crypto stands at USD 2.425T, still shy of the ATH of $3T by 23%. 
Despite this, my focus remains on bitcoin, and I anticipate its dominance to remain above 51%. 
If the overall crypto market cap reaches an ATH with this level of dominance, bitcoin with a market cap exceeding USD 1.5 trillion implies a price of approximately USD 77,000.

Chart 2: BTCUSD 1d

In the derivatives market, leverage is becoming more evident. 
The 60-day BTC Futures basis, standing at 22.4%, is the favoured trade among traders. 

Options volatility has surged above 70% across all tenors for both ETH and BTC; with a 25-delta risk-reversal in the 6v for BTC, selling calls looks at 40% yield is definitely an attractive trade.

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