BTC and ETH ended last week in mixed order, with BTC continuing its ascent above $100,000, posting gains of +1.54% and clinching a second consecutive week of gains, while ETH shed -2.36%, struggling to recoup the losses incurred earlier in that week.
U.S. equities ended last week closed to flat, yet still reflecting the growth-value divergence among US stocks with S&P edging lower from its recent high of 6,100 near 6,050 while Nasdaq reached a new all-time high of 20,055 on Dec 11 – later surpassed this week by a fresh high of 20,205. The 2 indices recorded respectively – 0.6% and +0.3% on the week as investors digested the latest November CPI data coming in line with expectations at +2.7% yearly – Core +3.3 from October’s +2.6% – and monthly at +0.3% following October’s 0.2% while the tech sector was fuelled optimism around Google’s new Willow chip and Broadcom’s updated outlook. Meanwhile, the Dow Jones struggled and registered its eighth consecutive day of losses on Friday with a VIX index near 13.6.
However, both equity and cryptocurrency markets experienced a sharp downturn this week following hawkish comments from J. Powell on Wednesday and the Fed’s updated rate cut estimates. Expectations for 2025 were scaled back to two cuts from the previously anticipated four, alongside upward revisions to inflation and economic growth projections. BTC retreated from its new all-time high of $108,496 on December 17 to $99,900, while the S&P 500 and Nasdaq fell -2.96% and -3.56%, closing at approximately 5,872 and 19,392, respectively.
U.S. Treasury yields spiked after the Fed signaled a slowdown in the pace of its monetary policy easing cycle. The 10-year yield climbed to a weekly high of 4.56%, a level last seen in May 2024, while the 2-year yield paused today at 4.32% after rising for eight consecutive days. Market expectations for a 25-basis-point Fed rate cut in January currently stand at 16%.
DXY strengthened significantly this week, closing near 108.202 on Wednesday after hitting a two-year high of 108.269, a level last reached in November 2022. The index is consolidating around the 108 mark, with an ascending trendline providing support near 106.1 and resistance projected in the 109 zone.
Oil prices traded sideways this week, hovering near $70. Market uncertainty over China’s economic outlook and the potential for increased U.S. production under Trump has heightened fears of an oversupplied market, keeping prices under pressure.
Stocks are showing a modest recovery today, edging slightly higher, while cryptocurrencies continue to decline. BTC hit a low near $95,587 – on perpetual futures – and is currently trading near $97,750 while ETH trades around $3,420. As markets process the latest Fed guidance and corporate earnings from companies like Micron, Nike, FedEx, and Carnival, attention is turning to Friday’s release of the November PCE index and an update on December’s Consumer Sentiment report, key indicators ahead of the holiday season.
Client Update: Recent Trades & Market Outlook
Recent Actions
Today, we closed our short positions when BTC retraced below the $100,000 mark and continued its decline toward the $96,000 region. At this level, we opened small, long positions on select altcoins, including ETH, IMX, and INCH, increasing our market exposure to 10%.
Market Strategy
We are closely monitoring the $90,000, $80,000, and $75,000 levels for BTC, which we believe represent key opportunities to build larger long positions. For now, our strategy involves engaging in swing trades with limited exposure, while preparing for more aggressive allocations if BTC approaches these levels in the coming weeks or months.
Market Outlook
BTC may face a challenging period ahead, with signs of an overheating market and potential risks from a slowing U.S. economy. This could lead to a short-term correction as we approach 2025.
Additionally, we’ve observed an increase in USDT dominance, signaling a possible bearish phase as capital shifts into safer stablecoin assets. We remain vigilant and adaptable to market changes while positioning for strategic opportunities.
BTC
BTC ended last week up, continuing its ascent above $100,000, posting gains of +1.54% and clinching a second consecutive week of gains. Digital asset investment products recorded another week of inflows, reaching $3.2 billion last week, marking the 10th consecutive week of positive momentum. According to CoinShares’ Digital Asset Fund Flows report, total inflows for this year have now reached $44.5 billion.
This week, BTC reached a new all-time high of $108,496 on Dec 17 before tumbling on Wednesday following the Fed’s guidance. The cryptocurrency broke below $100,000, hit a low near $95,587 – on perpetual futures – and is currently trading near $97,750.
On the daily chart, BTC is currently testing support near the lower end of the parallel channel. In the coming days, it will be crucial to see whether BTC can hold above the $100,000 level or if a pullback towards the $91,000 zone occurs.
We maintain a positive medium-term outlook for BTC, supported by expectations of a favorable regulatory environment under Trump’s administration, increasing institutional adoption driving volume growth, and the Fed’s rate cut cycle, which could encourage a shift toward riskier assets. However, we recognize potential signs of an overheating market and the risk of a slowing U.S. economy, which may lead to a short-term correction as we approach 2025.
Additionally, we observe an increase in USDT dominance, which could indicate a potential bearish phase in the coming weeks as capital shifts from cryptocurrencies into stablecoins.
After rounding up 2023 performance to +155%, BTC’s 2024 YTD performance is currently at +136%, while the MTD for December stands at +3.72%.
ETH
Unlike BTC, ETH ended last week with losses, trading near $3,900 on Friday and shedding – 2.36% as it struggled to recover from earlier declines. ETH started the new week with gains but tumbled alongside broader markets on Wednesday following the December Fed meeting.
Despite its disappointing performance, ETH-based assets continued to show strong momentum, recording a seventh consecutive week of fund inflows totaling $1 billion. Over the past seven weeks, inflows have reached $3.7 billion, bringing the year-to-date total to $4.4 billion.
On the daily chart, ETH broke below a major support level at $3,600, reaching a low of $3,325 today. The $3,060 and $2,800 levels currently serve as key supports, while the $4,000 zone acts as the nearest resistance in the upside.
After rounding up 2023 performance to +90%, ETH’s 2024 YTD performance is currently at +54%, while the MTD for December stands at -2.36%.
Other markets
U.S. equities ended last week closed to flat, yet still reflecting the growth-value divergence among US stocks with S&P edging lower from its recent high of 6,100 near 6,050 while Nasdaq reached a new all-time high of 20,055 on Dec 11 – later surpassed this week by a fresh high of 20,205. The 2 indices recorded respectively – 0.6% and +0.3% on the week as investors digested the latest November CPI data coming in line with expectations at +2.7% yearly – Core +3.3 from October’s +2.6% – and monthly at +0.3% following October’s 0.2% while the tech sector was fuelled by optimism around Google’s new Willow chip and Broadcom’s updated outlook. Meanwhile, the Dow Jones struggled and registered its eighth consecutive day of losses on Friday with a VIX index near 13.6.
However, both equity and cryptocurrency markets experienced a sharp downturn this week following hawkish comments from J. Powell on Wednesday and the Fed’s updated rate cut estimates. Expectations for 2025 were scaled back to two cuts from the previously anticipated four, alongside upward revisions to inflation and economic growth projections. BTC retreated from its new all-time high of $108,496 on December 17 to $99,900, while the S&P 500 and Nasdaq fell -2.96% and -3.56%, closing at approximately 5,872 and 19,392, respectively.
After ending 2023 up +24% and +43%, S&P and Nasdaq’s MTD performances for December are currently -2.7% and +0.9% with YTD performances standing at +23% and +29%.
DXY
DXY strengthened significantly this week, closing near 108.20 on Wednesday after hitting a two-year high of 108.27, a level last reached in November 2022. The index is consolidating around the 108 mark, with an ascending trendline providing support near 106.1 and resistance projected in the 109 zone.
The outlook for DXY remains strong and has been bolstered by the Fed’s recent hawkish remarks and the reduction in rate cut expectations for 2025. Additionally, we believe the incoming Trump presidency could provide momentum for the US dollar, despite the ongoing structural bearish pressures anticipated from further rate cuts heading into 2025. A « Goldilocks » scenario, where the US economy avoids a slowdown, could further strengthen the dollar and help counteract these downward pressures.
US Treasuries
U.S. Treasury yields spiked after the Fed signaled a slowdown in the pace of its monetary policy easing cycle and signs of persistent inflation reinforced with the release of in-line November’s CPI data. The 10-year yield climbed to a weekly high of 4.56%, a level last seen in May 2024, while the 2-year yield paused today at 4.32% after rising for eight consecutive days. Market expectations for a 25-basis-point Fed rate cut in January currently stand at 16%, according to the CME FedWatch Tool.
This week, yields rebounded, benefitting from the bond selloff driven by expectations of strong economic growth following Trump’s election, and persistent inflation reinforced by the release of in-line November’s CPI data.
The 10Y is currently trading near 4.57% while the 2Y yield is evolving near 4.32%, confirming the end of the yield curve inversion.
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