LAST WEEK, BTC and ETH were down but little changed over this past week, as BTC continued to hover around its 2-month low near $25,700. The two cryptocurrencies were trading near $26,050 and $1,650 on Friday, essentially flat – 0.0% – and edging marginally lower -0.5% respectively amidst a week marked by the Jackson Hole Economic Symposium, new cryptocurrency regulation proposals from the US Treasury Department and ARK Invest’s filing for two futures exchange-traded fund (ETF) on BTC and ETH.
US Equities gained over the week as markets advanced in anticipation of Wednesday’s Nvidia Q2 results despite a more difficult end of the week leading to Friday’s awaited J. Powell speech, suggesting that further interest rate hikes may be needed to tame inflation and pull it back to its 2% target level. S&P and Nasdaq clinched their first weekly gains in 4 weeks, closing the week near 4,405 and 13,590, up +0.8% and +2.3%.
US Treasury yields ended the volatile week mixed, with the short-term of the curve edging higher. The 10Y and 2Y yields were trading near 4.24% and 5.08% on Friday – from 4.26% and 4.95% the week before. Following the hawkish tone employed by J. Powell during his speech, markets are now pricing in a 78.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 86.5% the past week.
DXY rallied and carried on its positive momentum for another week, comfortably evolving above its 200-day MA and regaining the 104 in the latter part of the week. The index closed the week up near 104.19.
Oil prices experienced a consecutive weekly drop with the WTI closing near $79.97 from $81.36 the previous week. The increase in the US dollar and the possibility of a supply output boost from Venezuela, Kurdistan, and Iran hindered oil prices as the Biden administration is considering lifting some of the U.S. sanctions. WTI is regaining early this week as markets welcome China’s decision to half-stamp duty on trades to support the economy.
BTC and ETH are close to flat today as markets await the latest July PCE data – the Fed’s preferred gauge of inflation, expected at 3.3% and core PCE at 4.2% over the year – released on Thursday as well as key employment data with Wednesday’s ADP employment report for August – 170,000 expected – and Friday’s US Nonfarm Payrolls for August – 165,000 expected – which could provide some guidance on the resilience of the U.S. economy and the Fed’s intentions at its September meeting. Lastly, investors will keep an eye on the last batch of companies set to report earnings this week – Best Buy, Dell Technologies, Hewlett Packard, Salesforce, UBS among others.
CLIENT PROFITS
We kept our long positions on some large-cap coins (MATIC, ADA, XRP, LTC, DOT) that we opened when BTC broke $26,000.
The exposure to the market is still of 15% of the AUM, the rest being in cash.
BTC
BTC was little changed over this past week, hovering around its 2-month low near $25,700. BTC was trading near $26,050 on Friday, essentially flat amidst a week marked by the latest developments around the Jackson Hole Economic Symposium, new cryptocurrency regulation proposals from the US Treasury Department and ARK Invest’s filing for two futures exchange-traded fund (ETF) on BTC and ETH.
BTC reached a high near $26,800 on Wednesday but retraced the next day to settle near the $26,000 level for the rest of the week, a level still being tested. Price is currently showing a bear flag on the daily timeframe so BTC could potentially drop further in the coming days.
It goes without saying we remain bullish on the very long term but remain bearish on the medium and short term. Bitcoin hit a 2023 high near $31,818 on July 13 but has struggled to reclaim its $30,000 level since July 23. There is a risk of a drop further below if BTC doesn’t find the momentum to bounce back to the upside with major supports near $25,000 and $20,000 further below.
BTC’s 30-day Historical Volatility – HV- lowered slightly to 30% this week from 32% the week before.
After ending June up +11.9% and July down -4.1%, BTC’s performance for August is currently negative: -11.1% with the YTD performance for 2023 being +57% – from 57.8% the week before.
ETH
Like BTC, ETH dropped this past week, ending the week near $1,650 on Friday, down -0.5% over the week.
ETH price confirmed below the $1,700-mark, hitting a low near $1,580 on Tuesday, before reverting to the $1,650 level that is still currently being tested. Price is still evolving below the $1,700 with the $1,550, $1,370 and $1,100 further below acting as main supports. As mentioned in our previous reports the 200-day MA – near $1,800 currently – is a strong indicator of the overall trend, ETH confirming below that level could put more downward pressure and fuel a move to the downside.
After ending June up +3.2%, and the month of July down -4%, ETH is still in negative territory with the performance for August currently of -11.3% and the YTD performance for 2023 being +37.5% – from+39.7% the week before.
OTHER MARKETS
US Equities gained over the week as markets advanced in anticipation of Wednesday’s Nvidia Q2 results despite a more difficult end of the week leading to Friday’s awaited J. Powell speech suggesting that further interest rates hikes may be needed to tame inflation and pull it back to its 2% target level. S&P and Nasdaq clinched their first weekly gains in 4 weeks, closing the week near 4,405 and 13,590, up +0.8% and +2.3%.
S&P and Nasdaq’s performances for the month of August are now -3.4% and -4.5% and the YTD performances +15.5% and +30.8% – from +14.6% and +28.9% respectively as of last week.
As mentioned in our previous reports this month, the comparison between the rallying US Equities and the contracting Monetary supply M2 could have put in perspective the timing of a possible correction in stock markets considering the divergence currently occurring in 2023 as we can see in the graphs below. The divergence observed over the past weeks seems to have reduced with Stocks correcting this month of August.
DXY
DXY rallied and carried on its positive momentum for another week, comfortably evolving above its 200-day MA and regaining the 104 in the latter part of the week. The index closed the week up near 104.19.
DXY is currently near 104.02, confirming above its 200-day MA – near 103.16 – acting as support and below the 102 and 100.7 levels before the 100-mark that could act as a psychological level before the 200-week ie 1000-day MA further below currently near 98.3. On the upside, the 104.5-mark acts as the nearest resistance and could be tested in the coming days. The index rallied this past week but is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
US Treasury yields ended the volatile week mixed, with the short-term of the curve edging higher. The 10Y and 2Y yields were trading near 4.24% and 5.08% on Friday – from 4.26% and 4.95% the week before. Following the hawkish tone employed by J. Powell during his speech, markets are now pricing in a 78.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 86.5% the past week.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 4.21% and 5.05% from 4.34% and 4.99% last Monday, widening the inversion of the yield curve to 84bps, from 65 bps last week. An inverted 2-year -10yr curve is seen by the market as a sign of a possible incoming recession. The widening came as the recent strong economic data and the hawkish tone employed by J. Powell led investors to think interest rates could be maintained at a restrictive level for higher than expected.