Week-over-week performance:
- BTCUSD: 62,583 / -11.91% (!)
- ETHUSD: 3,035 / -17.79% (!!)
- US10Y: 4.61% / +20bps (!)
- DXY: 106.29 / +2.1% (!)
- GOLD (USD/OZ): 2,388 / +1.83%
- NDX: 17,706 / -2.17%
- VIX: 19.22 / +26.61% (!)
On the macro side:
It was a strong macro week.
Leading US economic indicators exceeded expectations, and inflation remains sticky.
Correspondingly, the US 10-year Treasury note auction underperformed by 1.1 basis points, indicating weak demand for notes.
This, combined with geopolitical risks arising from the Middle East, turned the risk-off button on.
Cryptocurrencies experienced a significant downturn, with many altcoins wiping out their year-to-date gains.
Additionally, US equities lost momentum and are now trading below the 50-day moving average.
Unsurprisingly defensive/panic assets performed well.
Gold is trading at all-time highs, the US dollar index (DXY) has risen to a 2023 high, and Treasuries have rallied as market participants now price in no rate cuts for this year (!!).
Despite escalating geopolitical risks, historical trends suggest that significant market sell-offs often present buying opportunities, such as during the Covid pandemic.
This is a favourable time to consider building strategic positions in the market.
Chart 1: Target rate probabilities for 18 December 2024 Fed Meeting
Looking ahead:
- Tuesday, 16 April: Fed Chair Powell Speaks
- Wednesday, 17 April: UK CPI, EU CPI, Beige Book
- Thursday, 18 April: US Jobs
On the FX side:
The current situation is obviously bullish for the USD.
Nevertheless, the speed with which the USD has risen on the back of higher-for-longer US dollar yields shows that almost no one was positioned for such a scenario, as everyone was positioned for a risk-on market.
If the war risk escalates, the USD and CHF will appreciate much more.
Nevertheless, I still like short CHF and long USD.
On the crypto side:
Although the long-term charts do not look too alarming, there has been a significant amount of turmoil in the market.
Friday and Saturday witnessed one of the most significant de-risking and de-leveraging events in the crypto sphere.
Bitcoin (BTC) fell 15% from its all-time high (ATH), while altcoins on average are down by over 20% from their peak in March.
This downturn was likely exacerbated by reduced liquidity over the weekend.
In the BTC market, large bids were seen below USD 62,000, with most trading taking place around USD 64,000.
Derivatives experienced a long squeeze, with much of the open interest being unwound and funding rates moving into negative territory.
However, basis rates remain stubbornly high, offering a 10% yield.
Such a market reset is actually beneficial.
Basis and funding rates were overly optimistic, if not nonsensical.
Despite short-term speculation and macro correlations playing an important role, my overall outlook for bitcoin remains structurally bullish.
Let me summarise:
- BTC ETF sees strong inflows and GBTC is left with 311k BTC
- Halving
- Middle East conflict (Ukraine/Russia was bullish)
- Hot inflation
In terms of positioning, buying spot below USD 62,000 looks promising for BTC.
In derivatives, given the current high convexity, out-of-the-money (OTM) options are particularly lucrative in terms of gamma.
Selling puts to finance calls is my favourite trade at the moment.
However, the situation remains different for altcoins.
Chart 2: BTCUSD 1h
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