BTC and ETH remained relatively stable over these past two weeks, currently trading slightly below our last report’s levels; near the $16,600 and $1,200 levels. Price action momentarily rose last week, boosted by the lower-than-expected CPI data -7.1%(core 6%) vs 7.3% (core 6.1%) – and the prospects of Wednesday’s 14th Fed meeting decision to move rates up for the seventh time this year, in an ongoing push to lower inflation.
Despite the 0.50% rate hike – bringing the target rate range to 4.25% – 4.50%, the Hawkish tone employed by Fed chair J. Powell indicated a higher peak fed funds rate of 5.1% for 2023 – the consensus was 4.8% to 5.0% – and the slowing retail Sales data for November – -0.6% – turned market sentiment lower for the remainder of the week with risks of a recession looming.
After a calm start of the week, BTC and ETH are still trading close to flat with a negative bias, near the $16,600 and $1,200 levels ahead of the Christmas weekend.
Equities are retracing with more vigour with S&P and Nasdaq printing -2.6% and -2.7% as of writing, near 3,770 and 10,320. Oil prices recovered since our last report, with the WTI now trading near $78, boosted by the positive prospects around China’s economy.
This week, investors will turn their focus to Friday’s PCE Price Index for the month of November, which will help the Fed gauge the level of inflation. A batch of real estate data and the Consumer Confidence Index will also be published and could help assess the health of the US economy going into the Holidays.
Client Profits
We opened a position in 2 large-cap coins, bringing the exposure to the market to 42%, the rest being in cash.
We still have our positions in BTC and a few large-cap coins.
BTC
BTC ended last week down -2.8% and has been hovering above the 16,600 level this week. Early last week, the lower-than-expected CPI data showing inflation was cooling off spurred some momentum but the price reversed on Wednesday with the Fed reiterating its priority to fight stubborn inflation. Price action remained relatively stable this week with a bearish bias as markets await Friday’s PCE inflation data ahead of the Holidays.
BTC is retracing slightly today, trading near $16,660, bringing the performance for the month of December to -3%.
In the medium term, we believe the trend to remain bearish as the lagged impact of the Fed tightening may be starting to weaken consumption and shed some light on the risk of a recession looming. We believe that the rate hikes will continue throughout 2023 with a potential pivot or rate cuts occurring as early as 2024. We believe the macroeconomic policy and the regulatory outcome to be BTC’s major drivers in the medium term with the next supports to watch on the downside being the $13,900 /$12,090 level and then the next support would be near $9,000.
The potential of a Fed slowdown or pivot combined with a stalling DXY and more clarity brought by the US regulatory framework in 2023 could also fuel a rebound in the longer term. On the upside, the $17,600-mark still acts as resistance.
Despite the bearish cycle, we are currently in, we could see some potential for a rebound and bull run in 2023 spanning across several months. In that respect, an indicative comparison with the Dec 2018 / April 2019 and the current period could put in perspective the timing of a possible rebound in 2023. We can see the bearish trend from Dec 2018 reversing throughout the first half of 2019.
ETH
ETH closed last week with losses of -9.8% following the Fed’s meeting and disappointing retail sales data, reaching a low $1,156 on Wednesday, breaking below the narrow ascending channel we discussed in the last report.
Price action has been trading relatively flat this week below the $1,250 and within our descending parallel channel with a recent low of $1,070 still acting as main support and then $900 mark – the lowest of the year. On the upside, the $1,250-mark acts as the resistance.
We see the bearish pressure continuing in the short term while the uncertainty regarding the lagging effect of rate hikes on the economy could bring prices further down. Like BTC, despite being in a bearish cycle, we see some room for a rebound spanning across several months in 2023.
Other markets
US Equity markets printed some losses as well over last week, with S&P and Nasdaq Comp losing -2.1% and -2.7% respectively.
US Equity markets started last week in a similar fashion to cryptocurrencies, with gains, and reversed on Wednesday with the FOMC meeting and slowing economic data.
Today, US Equities are losing some ground, extending the losses from Tuesday, Dec 13th as markets weigh the risk of recession.
S&P and Nasdaq are down -2.7% and -2.8% respectively, bringing the month-to-date performance to -7% and -9.1%.
DXY
DXY has been trading downwards over the past two weeks, breaking below its 104.9 support and confirming below its 200 MA – currently at 106. It remained flat over last week as the gains made in the latter part of the week were able to offset the difficult start of the week.
DXY has been trading sideways this week, regaining some traction in the last two sessions, trading around 104.5, with the recent FOMC meeting and hawkish guidance acting as a catalyst for price action. On the upside, the lower band of our descending channel still acts as the main resistance, currently at 108.3.
US Treasuries
Bond yields lost ground last week, with the 10Y yield hitting a low of 3.42% as investors remained concerned that further rate hikes and their lagged effect could send the US economy into a recession.
The 10Y yield has been recovering this week and is trading at 3.66% as of writing and the 2Y yield is at 4.25%.