BTC and ETH dropped this past week, as BTC fell below $26,000 with a low of $24,581 on Binance’s perpetual futures during Friday’s session. The two cryptocurrencies were trading near $26,050 and $1,660, down -11.4% and -10.1% for the week amidst growing concerns over China’s property sector, hawkish interest rate outlooks from the Fed minutes, and a report that SpaceX had sold some of its bitcoin holdings. The downward swing was exacerbated by the low volume observed on exchanges, with BTC dropping more than 7% during Thursday’s session.
US Equities continued to fall despite paring some of their losses on Friday, with S&P and Nasdaq posting their third straight weekly losses closing the week near 4,370 and 13,291, down -2.1% and -2.6% as investors navigated July’s Fed minutes and earnings from the big retailers, combined with economic problems in China taking most of the attention last week.
US Treasury yields surged with the 10Y yield gaining in all of the sessions but Friday as markets weighed in on the possibility of a soft landing with the stronger-than-expected retail sales, housing starts and industrial production data, adding to the momentum ignited early August by Fitch’s downgrade of the US10Y note. The 10Y and 2Y yields were trading up near 4.26% and 4.95% on Friday – from 4.16% and 4.90% the week before. Markets are now pricing in an 86.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 88% the past week.
DXY rallied and carried on its positive momentum for another week, surpassing the 103 mark and confirming above. The index closed the week up near 103.43.
Oil price dropped and ended a streak of seven weekly increases last week with WTI closing near $81.36 – from $83.01 the previous week – as the weak economic data from China and Fed minutes suggesting another rate hike in 2023 cast a shadow on prices.
BTC and ETH are trading down today, near $26,100 and $1,670 as investors switch their focus to this week’s annual Jackson Hole Economic Symposium where Friday’s J. Powell speech should take center stage. Markets will also keep an eye on the latest corporate earnings with Zoom Video Communications, Nvidia and some major retailers set to report with Dick’s Sporting Goods, Kohl’s, Lowe’s, Macy’s, Nordstrom among others.
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Client Profits
We closed our short ETH position when ETH dipped below the $1,735 mark.
We closed our position in BTC when BTC hit $28,000, $25,950 and $25,200 subsequently (perp futures on Binance).
We opened long positions on some large-cap coins (MATIC, ADA, XRP, LTC, DOT) when BTC broke $26k.
The exposure to the market is 15% of the AUM, the rest being in cash.
BTC
BTC dropped this past week, falling below $26,000 with a low of $25,600 – and $24,581 on Binance’s perpetual futures – during Friday’s session. BTC was trading near $26,050, down -11.4% for the week amidst growing concerns over China’s property sector, hawkish interest rate outlooks from the Fed minutes, and a report that SpaceX had sold some of its bitcoin holdings. The downward swing was exacerbated by the low volume observed on exchanges, with BTC dropping more than 7% during Thursday’s session.
BTC failed to carry on consolidating within the range of $29,000-$30,600 and dropped heavily on Thursday (-7%), piercing through the $28,000 and its 50-day MA to find support near the $26,000.
Whereas US stocks ended the day up, cryptos didn’t follow the move and remained flat with a negative bias. We can expect crypto prices to show potential for a rebound in the short term when trading volume resumes, but this divergence could also indicate the start of a bearish movement.
It goes without saying we remain bullish on the very long term but remain however bearish on the medium and short term. 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.
Understandably, BTC’s 30-day Historical Volatility – HV- picked up to 32% this week from 16% the week before, which was its lowest level since November 2018.
After ending June up +11.9% and July down -4.1%, BTC’s performance for August is currently negative: -10.6% with the YTD performance for 2023 being +57.8% – from 76.6% the week before.
ETH
Like BTC, ETH dropped this past week, ending the week near $1,850 on Friday, down -10.1% over the week.
ETH stopped the consolidation effort and breached below the $1,800 and $1,700 on Thursday with a low of $1,540 – $1,490 on Binance’s perpetual futures – during that day before settling near $1,660 over the weekend. 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 $1,815 is a strong indicator of the overall trend, ETH breaching below that level put more downward pressure and fuelled the 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 -9.9% and the YTD performance for 2023 being +39.7% – from+52.9% the week before.
Other markets
US Equities continued to fall despite paring some of their losses on Friday, with S&P and Nasdaq posting their third straight weekly losses closing the week near 4,370 and 13,291, down -2.1% and -2.6% as investors navigated July’s Fed minutes and earnings from the big retailers, combined with economic challenges in China taking most of the attention last week.
S&P and Nasdaq’s performances for the month of August are now of -4.1% and -5.9% and the YTD performances +14.6% and +28.9% – from +16.3% and +30.4% 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 this past week with Stocks correcting with the latest minute of the Fed and China’s economic issues.
S&P and M2 Monetary Supply
DXY
DXY rallied and carried on its positive momentum for another week, surpassing the 103 mark and confirming above. The index closed the week up near 103.43.
DXY is currently near 103.35, 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. 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 surged with the 10Y yield gaining in all of the sessions but Friday as markets weighed in on the possibility of a soft landing with the stronger-than-expected retail sales, housing starts and industrial production, adding to the momentum ignited in early August by Fitch’s downgrade of the US10Y note. The 10Y and 2Y yields were trading up near 4.26% and 4.95% on Friday – from 4.16% and 4.90% the week before. Markets are now pricing in an 86.5% chance of no rate hike during the next FOMC meeting in September, according to CME’s FedWatchTool, from 88% the past week.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 4.34% and 4.99% from 4.22% and 4.96% last Monday, reducing the inversion of the yield curve to 65 bps, from 74 bps last week. An inverted 2yr -10yr curve is seen by the market as a sign of a possible incoming recession. However, if signs of a potential soft landing in the US economy gain further credit, this spread should tighten and could turn positive later in the future.