CFT Update Tuesday, February 21st
BTC and ETH rallied last week, with BTC and ETH reaching their highest level of the year on Thursday at $25,347 and $1,742, and closing last Friday near $24,580 and $1,694, up +4.9% and +11.9% from their level a week ago – $21,640 and $1,515 – with cryptos benefitting from the latest CPI data confirming the cooling of inflation in the US for the seventh month in a row in January to 6.4% – down from an annual rate of 6.5% in December and a 40-year high of 9.1% in June 2022 – which spurred investors’ sentiment and raised their hopes of a soft landing.
US Equities ended the week mixed with S&P and Nasdaq closing near 4,079 and 11,787, printing -0.3% and +0.5% respectively for the week on Friday as markets digested the latest earnings reports and readjusted their Fed bets after hawkish comments from Fed official James Bullard opening the door to a 50 bps rate hike in March.
US Treasuries rose with the 10Y and 2Y closing near 3.82% and 4.62% on Friday, from 3.74% and 4.52% the week before, deepening a bit further the inversion of the yield curve to levels not seen since the 1980s – 82bps difference. DXY rose slightly last week closing near 103.88 on Friday and Oil prices decreased somewhat as the US Dollar rebound shed some concerns over the demand, with the WTI closing near $77 on Friday – from $79 the week before.
Cryptos are retracing today as well as US Equities as markets digest the hawkish comments made by Fed officials and the cautious economic forecasts coming from some reporting companies – Walmart Inc. and Home Depot – and start turning their focus to the surge in treasury yields amid rising geopolitical tensions.
With markets closed on Monday, investors will await Wednesday’s minutes of the latest FOMC meeting and Friday’s Personal Consumption Expenditure Index – PCE Index.
Markets will also keep an eye on the following of the earnings season with some major companies set to report – Alibaba, Coinbase, Moderna, and Nvidia among others.
Client Profits
We opened a short position last week on a large-cap coin (AVAX) and took profits later in the week, realizing a 7% gain.
We also opened other short positions in large-cap coins later in the week (AVAX and MATIC) and closed our position in DOT with little gains.
We still have our short positions in SOL and ETH and our long position in BTC. The exposure to the market is now 23.5%, the rest being in cash.
BTC
BTC ended last week near $24,580, up +13.6% on the week driven by the well-received CPI inflation data – BTC gaining +9.55% on Wednesday and reaching a high of $25,347 on Thursday, prevailing on the uncertainties about the regulatory framework and the SEC cracking down on the exchange Kraken.
BTC’s 30-day Historical Volatility – HV- is now above the 50% mark, 10 points above its level from a week ago.
BTC exchanged near the $24,500 resistance over the weekend and is now trading near $24,270, bringing the MTD performance for February to +4.9% and the YTD performance for 2023 to +46%.
Despite the uncertainty surrounding the crypto regulation framework, bullish pressure fuelled by encouraging inflation data has propelled crypto markets to a new high in 2023. We remained however cautious as price action could consolidate or pullback in the coming weeks, especially if US Equities don’t find a similar momentum as investors could reassess how US interest rates will rise this year. The CPI data follows last month’s strong labor report, which showed that employers added 517,000 jobs, well above expectations and raising concerns that the economy remains too hot, which could keep inflation at high levels for some time.
On the upside, the $24,500 region acts as resistance while the next support to watch is the downside near the $22,700 level and then the pre-FTX level at $21,300 and the ATH from Dec 2017 just under $20,000 further below.
ETH
Like BTC, ETH ended the week with gains closing near $1,694 on Friday, up +11.9% over the week from its $1,514 level the week before with ETH printing more than +7.6% on Wednesday and reaching a high of $1,742 on Thursday, breaking above its $1,650 resistance, driven by the momentum fuelled by the release of the CPI data.
ETH also remained stable over the weekend around the $1,680 mark and is losing a bit of ground today, trading near $1,640, bringing the performance for the month of February back into positive territory with +3.4%.
Price action is now testing the $1,650 resistance with the lower trendline of our upward-sloping parallel channel acting as support, currently near $1,600.
Other markets
US Equities closed the past week mixed, with S&P and Nasdaq printing -0.3% and +0.5%, throughout a week marked with cautious earnings outlook, encouraging inflation data readings, and concerns about a more aggressive Federal Reserve.
S&P and Nasdaq are retracing today, down -2% and -2.5% near 4,000 and 11,490. The performance for February is now -0.4% and -0.8% respectively.
DXY
DXY increased slightly over the week, ending near 103.88 on Friday from 103.58 the week before. Price action broke above its 103.5 resistance as USD gained some traction with the hawkish comments made by some Fed speakers.
DXY is trading moderately up today at 104.2, confirming above the 103.5 support and the MA 200 acting as the next resistance – currently at 106.39.
US Treasuries
US Treasuries continued the rally last week as investors bet on a more aggressive Federal Reserve, with the 10Y and 2Y closing near 3.82% and 4.62% on Friday, from 3.74% and 4.52% the week before, deepening a bit further the inversion of the yield curve to levels not seen since the 1980s – 82bps difference, accentuating the reading of a possible recession in the future.
The 10Y is now trading near 3.95% from 3.73% the week before, and the 2Y yield is at 4.72% – from 4.54% last Monday.