TA Tuesday: BTC and ETH surge and US dollar weakens (2024)

Week-over-week performance:

• BTCUSD: 71,751 / +7.91% (!)
• ETHUSD: 4,013 / +8.78% (!)
• US10Y: 4.10% / -9bps
• DXY: 102.8 / -1.09%
• GOLD (USD/OZ): 2,174 / +2.79 (!)
• NDX: 17,951 / -1.50%
• VIX: 15.24 / +13%

On the macro side:

Last week, the US NFP report surpassed expectations with a gain of USD 275,000 jobs compared to the anticipated USD 198,000.
Unemployment ticked up and wage growth slowed, pointing to a robust labour market.
This reinforces the notion that the economy is doing well, and that inflation is not all too bad.

Considering these factors, a mid-year rate cut at the June meeting seems reasonable, and is a sentiment shared by Powell and the Fed. This is the potential soft-landing scenario.

With economic indicators displaying strength, risk assets continue to perform well as the US dollar depreciates and gold rises.
All-time highs remain the focus of intense trading activity.
The underperformance of stocks such as AAPL and TESLA is significantly impacting US indices, but I still see value in smaller caps.

Looking ahead:

• Tuesday 12 March: US CPI
• Wednesday 13 March: UK GDP
• Thursday 14 March: CH PPI, US PPI

On the FX side:
The US dollar faced downward pressure following stronger than anticipated US economic figures, leading the DXY to find support around 102.35.
This week brings key CPI and PPI releases in the US.
The CPI is forecasted to show a +0.4% MoM and a +3.1% YoY
Meanwhile, Germany’s CPI came in at 0.4% MoM and 2.5% YoY, suggesting that the ECP may closely mirror the Fed’s actions, potentially keeping the DXY below 103.64 and supported at 102.22.

Once again, the weakening US dollar is giving risk assets a breather.

Chart 1: DXY 1d

On the crypto side:
Last week, I mentioned the satisfying feeling of euphoria in the early stages.
The breakthrough of USD 70,000 marked a significant milestone, prompting many of us to wonder, “Is it time to sell our bitcoins?”

Retail interest is picking up again, and ETF inflows continue to act as a driving force behind the upward movement.
From my perspective, Monday’s early movement seemed to anticipate the ETF inflows expected later in the day.
Mondays have consistently seen strong inflows, adding to this anticipation.

Given the high volatility and leverage in this market, it is reasonable to expect some flash crashes, which I believe will quickly find support in the USD 69,000-70,000 range.
The current leverage seems to be due to a prolonged market rally, with dealers facing shortages in inventory amid the upward trend, leading them to engage in buying D1s, calls, and selling puts.

To see December futures trading at an 18% premium is simply breathtaking.
Basis trades continue to offer a competitive sharpening in the markets, but I also see significant value in long-dated options, such as those expiring in September or December.

My bias is that the basis will not decay linearly until September, but will compress rapidly.
This will certainly be the catalyst for the unwinding of short spread trades, but it will also cause long-dated at-the-money options to go deep out of the money, losing around 30% of their value as the underlying futures close the gap with the spot price.

In the spot market, I view USD 69,000-70,000 as support and USD 75,000 as resistance.

Chart 2: BTCUSD 1d

After the bitcoin surge, the recent spikes in LTC and XRP seemed like a shift from BTC to “which crypto is left behind?”
I view these as favourable opportunities to take profits in LTC and XRP, as I prefer to stay with the winners at this point.