CFT Update Thursday, December 29th
BTC and ETH dropped this week, with lows below $16,500 and $1,200 this Wednesday. Investors’ hopes for a “Santa Claus rally” are yet to materialize as Equities have also been retracing this week with S&P and Nasdaq losing -1.2% and -1.35% on Wednesday, currently near 3,850 and 10,500. Oil price is slipping, with the WTI now trading near $78 as China’s recent Covid spike dampens demand outlook and DXY has paused its rally, now settling near 3.83%.
Stocks are bouncing back today after today’s US weekly jobless claims data came out higher than expected, suggesting the Fed’s monetary tightening may slow in the future.
BTC and ETH are also benefiting from the news, up +0.3% and +0.5% near $16,600 and $1,200.
With US markets closed on Monday, the first part of the week was relatively short and calm with the latest data on home prices made available.
For the rest of this week, investors will keep an eye on Friday’s Purchasing Managers Index- PMI – for the month of December, which will help assess the strength of the manufacturing sector in the US.
Next week will come with fresh volatility as investors will enter the new year eyeing towards Wednesday, Jan 4th’s ISM manufacturing index for December as well as Friday, Jan 6th’s Nonfarm payrolls for December.
Client Profits
We added some exposure to one of our large-cap coin position, bringing the exposure to the market to 44.5%, the rest being in cash.
We still have our positions in BTC and a few other large-cap coins.
BTC
BTC ended last week down – 0.1% and remained steady throughout the extended Christmas holiday weekend around $16,850 with last Friday’s PCE data bringing little impact to the price.
BTC has been losing some ground this week although price action is close to flat today with BTC hovering above the $16,500 level, up 0.18% at $16,570, which brings the month-to-date performance to -3%.
Like last week, we believe the trend in the medium term to remain bearish as the lagged impact of the Fed tightening may be starting to weaken consumption and shed some light on a growing risk of recession.
We believe the rate hikes to 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.
ETH
ETH closed last week with gains, up +4.5% and like BTC, held steady throughout the Christmas holiday weekend, hovering above the $1,220 level.
Price action lost ground early this week, touching the upper part of our downward parallel channel – near $1,185 – and ETH is now trying to rebound, currently just below the $1,200 level, at $1,196, bringing the MTD performance to -8%.
The recent low of $1,070 still acts 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 several months in 2023. We believe regulation around cryptocurrencies and inflation to be the major drivers in 2023.
Other markets
US Equities printed some losses over last week, with S&P and Nasdaq Comp losing -0.2% and -2% respectively, despite rising gently on Friday with the University of Michigan’s latest Consumer Sentiment Index showing an uptick in optimism about the economy..
US Equity markets lost ground earlier this week in a similar fashion to cryptocurrencies but have reversed today and are recovering most of the losses suffered in the previous two days.
S&P and Nasdaq are up +1.9% and +2.7% respectively, bringing the month-to-date performance to -7% and -9%.
DXY
DXY has been trading sideways this past week, around 104, within a descending parallel channel in the absence of strong convictions since the last FOMC’s meeting and economic indicators sending mixed signals, making it challenging for investors to identify a catalyst.
DXY is losing ground today, trading near 103.98 with the recent low of 103.45 acting as support and the upper band of our descending channel – currently at 105 acting as the resistance in the upside.
US Treasuries
Bond yields rallied this past week, reaching a high of 3.89% during Wednesday’s session as investors were digesting the recent rate hike and adjusted their rate bets for 2023 as China’s reopening could support demand for prices and make inflation stickier than expected.
The 10Y yield is consolidating near 3.83% today – from 3.66% last week, and the 2Y yield at 4.36% – from 4.25% last week.