Weekly Report CFT Monday, May 13th, 2024
BTC and ETH closed the month of April with losses of -15% and -17%, registering their biggest monthly loss in 2024, and started May trading sideways, with BTC hovering above $60,000 and notching a sixth consecutive week of losses while ETH fell below the $3,000. The two cryptocurrencies were trading near $60,790 and $2,910 on Friday, respectively down – 3.3% and -6.2% over the week as the ETF momentum and speculation about a Spot ETH ETF cooled down further with minor fund inflows, ahead of next week’s inflation data. Positive weekly outflows of +$130m from Spot BTC ETFs brought the year-to-date total to US$12.92 billion, according to the CoinShares report ‘Digital Asset Fund Flows’.
US Equities climbed last week as investors digested the latest corporate earnings -Disney, Palantir, Uber – and updates on consumer sentiment and the labor market. The University of Michigan’s consumer sentiment survey for May came in weaker than expected on Friday at 67.4 from 77.2 in April, while US weekly jobless claims reached their highest level in more than eight months – 231,000, highlighting a potential slowdown of the economy and keeping hopes of rate cuts alive for 2024 ahead of next week’s CPI data. S&P and Nasdaq closed out this Friday higher, near 5,222 and 16,340, respectively notching +1.9% and +1.1% while the VIX index edged lower near 13%.
US Treasury yields retreated amidst signals pointing towards a potential slowdown of the US economy and the labor market, casting doubt on market expectations of sustained higher for longer interest rates. Although no rate cut is anticipated in June, the likelihood of a 25-basis points rate reduction in September 2024 has increased to 50%, up from 44% a month ago according to the CME FedWatch Tool. The 10-year yield reached a low of 4.42% on Tuesday, settling near 4.47% for the remainder of the week, still within its year-long ascending parallel range. Currently, the 10-year yield is trading around 4.49%, while the 2-year yield is hovering near 4.87%, both down from 4.46% and 4.82% respectively the previous week.
Unlike yields, DXY quietly eked out some gains, hitting a high of 105.74 and closing out the week near 105.31. The index is trading flat today in anticipation of key PPI and CPI figures this week as inflation for April is expected to stay strong at 3.5%.
Oil prices moved higher last week on the prospect of a possible easing of the monetary policy and lingering tensions in the Middle East, which continue to pose a risk of global supply disruptions, despite worries about increasing US inventory levels. The WTI closed the week near $78.13 from $77.93 the week before.
BTC and ETH are trading up today as markets look ahead to this week’s agenda where the PPI and CPI inflation reports are set to take center stage this Tuesday and Wednesday – headline and core CPI expected at +3.5% and +3.8% yearly. On Thursday, investors will receive an update on weekly jobless claims, while Friday will see the release of some U.S. leading economic indicators. Markets will also look forward to the latest batch of corporate earnings with Alibaba, JD, Home Depot, CISCO, and Walmart set to report mong others while keeping an eye on various Fed officials’ allocution throughout the week.
Client Profits
We continued to execute our trading strategy effectively, outperforming the market amid the recent downturn—while the market saw a 60%-70% drop since March, our portfolio experienced only a 13% decrease, achieving a performance ratio of nearly 6:1.
We strategically opened short positions and selected Altcoins to diversify and reduce the risk in our primarily long-positioned portfolio.
Considering the Federal Reserve’s current monetary policy trajectory towards tighter financial conditions and reduced likelihood of rate cuts, we anticipate that the markets may shift to a ‘risk-off’ stance in the upcoming months. This environment is expected to drive cryptocurrencies, including BTC, towards new lows, which aligns with our short to medium-term price targets.
BTC has been in a choppy sideways cycle for several weeks with no sign of trend for a possible day trading. We will monitor closely and await confirmation of a movement in BTC before positioning ourselves heavily in a trending market.
BTC
BTC closed the month of April with losses of -15%, registering its biggest monthly loss in 2024, and started May trading sideways, with prices hovering above $60,000 and notching a sixth consecutive week of losses. The cryptocurrency was trading near $60,790 on Friday, down -3.3% over the week as the ETF momentum and speculation about a Spot ETH ETF cooled down further with minor fund inflows, ahead of next week’s inflation data. Positive weekly outflows of +$130m from Spot BTC ETFs brought the year-to-date total to US$12.92 billion, according to the CoinShares report ‘Digital Asset Fund Flows’.
On the daily chart, BTC price has been trading sideways with a bearish bias, extending the pullback phase after hitting a new ATH of $73,915 on Mar 14. Last week, BTC found some resistance near $65,100 and retraced back to $60,100 before slowly recovering thereafter. BTC is currently exchanging near $63,200 with prices evolving between its two descending trendlines near $58,200 and $71,000 acting as the closest support and resistance. On the daily timeframe, we can notice the formation of a possible reverse Head And Shoulders pattern, indicative of a potential bullish breakout – see graph.
In the short to medium term, geopolitical uncertainties along with monetary outlooks and Spot ETH approvals are set to play major catalysts for the remainder of the year. The geopolitical tensions and inflation outlook seem to have prevailed on the positive momentum fuelled by the growing ETF inflow in 2024, casting concerns over the strength of the economy to sustain higher for longer rates and avoid a stagflation cycle.
BTC’s 30-day Historical Volatility – HV- consolidated to around 50% this week, in line with last week’s level.
After rounding up 2023 performance to +155%, BTC closed out January up +0.7%, February up +43.7%, and March +16.6%, BTC closed April down -15%, and the MTD for May is currently +3.9 with the YTD for 2024 being +49.1%.
ETH
ETH closed April with a significant loss of -17%, marking its largest monthly decline in 2024. It began May trading sideways, mirroring BTC’s movement, with prices dipping below $3,000. By Friday, the cryptocurrency was hovering near $2,910, marking a weekly decline of -6.2%.
The price found support against its primary ascending trendline on May 1st and 10th, and it is currently trading slightly above that support at $2,970. However, the repeated testing of this trendline in recent days could signal a potential bearish trend, with prices possibly breaking below and dropping to $2,700, the next significant support level – see graph below.
ETH is currently trading near $2,960, with the $2,700 and $3,200 zones serving as major support and resistance levels.
ETH saw significant gains earlier this year, closing January up +0.05%, February up +46%, March up +9.2%, but April saw a notable decline of -17.4%. As of May, the month-to-date performance stands at -1.3%, with a year-to-date increase of +30.3%.
Other markets
US Equities climbed this week as investors digested the latest corporate earnings -Disney, Palantir, Uber – and updates on consumer sentiment and the labor market. The University of Michigan’s consumer sentiment survey for May came in weaker than expected on Friday at 67.4 from 77.2 in April, while US weekly jobless claims reached their highest level in more than eight months – 231,000, highlighting a potential slowdown of the economy and keeping hopes of rate cuts alive for 2024 ahead of next week’s CPI data. S&P and Nasdaq closed out this Friday higher, near 5,222 and 16,340, respectively notching +1.9% and +1.1% while the VIX index edged lower near 13%.
After ending 2023 up +17% and +29.6%, S&P and Nasdaq closed out January up +1.6% and +1.0%, February up +5.2% and +6.1%, March up +3.1% and +1.2% and April down -4.2% and -4.4%, the MTD performances for May are currently of +3.7% and +4.7% with YTD performances of +9.5% and +9.2%.
DXY
Unlike yields, DXY quietly eked out some gains, hitting a high of 105.74 and closing out the week near 105.31. The index is trading flat today in anticipation of key PPI and CPI figures this week as inflation for April is expected to stay strong at 3.5%.
Following its peak of 106.5 on April 16, the index has been retracing and finding support and consolidating near the 105-mark above its 100-day and 200-day MAs acting as the closest support to the downside.
DXY has been benefitting lately from robust inflation data and hawkish comments from Fed officials raising the prospect of a higher for longer rates scenario and validating the Fed’s intention to push back on potential rate cuts. The outlook for the index remains challenging as inflation pressure is expected to cool down later in the year.
US Treasuries
US Treasury yields retreated amidst signals pointing towards a potential slowdown of the US economy and the labor market, casting doubt on market expectations of sustained higher for longer interest rates. Although no rate cut is anticipated in June, the likelihood of a 25-basis points rate reduction in September 2024 has increased to 50%, up from 44% a month ago according to the CME FedWatch Tool.
The 10-year yield reached a low of 4.42% on Tuesday, settling near 4.47% for the remainder of the week, still within its year-long ascending parallel range. Currently, the 10-year yield is trading around 4.49%, while the 2-year yield is hovering near 4.87%, both down from 4.46% and 4.82% respectively the previous week.
The 10Y is currently trading near 4.49% while the 2Y yield is evolving near 4.87%, both yields being flat from the previous week, maintaining the inversion of the yield curve to 38 bps.