LAST WEEK, BTC and ETH declined last week, with BTC falling below $27,000 with a 2-week low of $26,533 on Wednesday, as markets continued to monitor the latest developments around the Middle East conflict and assessed the deteriorating consumer sentiment data as well as the higher-than-expected U.S. inflation data. The two cryptocurrencies were trading near $26,860 and $1,550 on Friday, respectively shedding -3.9% and -5.7% over the week.
US Equities, despite encouraging corporate earnings reports, also tumbled in the wake of the latest inflation data and revived fears of further tightening from the Fed as the ongoing geopolitical turmoil in the Middle East could add further upward pressure to prices through oil prices. September PPI rose 2.2% every year, registering the biggest increase since April 2023 while consumer sentiment data fell short of expectations coming out at 63 vs 67.2 expected. S&P and Nasdaq closed on Friday near 4,327 and 13,407, respectively down -0.4% and -0.2%.
US Treasury yields wrapped up a choppy week with losses as dovish interventions from Fed officials – indicating interest rates may have peaked – and growing uncertainties around the Middle East conflict sparked a flight to safer assets, helping drive yields down. There is still a strong expectation that rates will remain unchanged in November as markets are currently pricing in a 90% chance of no rate hike during the November FOMC meeting and a 67% chance of no rate hike in December – from 74% as of last week – according to CME’s FedWatchTool.
DXY edged moderately higher this week, hitting a high of 106.78 on Friday. The index steadily declined over the week but managed to reverse the trend on Friday, closing near 106.67 from 106.10 the week before.
Oil prices also experienced a volatile week but managed to pare its losses on Friday. The WTI ended the week up near $87.68 from $82.74 the week before with the main driver being the Israel-Palestine conflict and the potentiality of a wider conflict in the key oil-producing region, which could further tighten global oil supply and drive prices up.
BTC and ETH are experiencing a volatile trading session which saw BTC briefly approaching $30,000 earlier – $30,700 on perpetual futures – as rumors of an incoming Spot BTC approval from the SEC picked up steam. The news later in the day was deemed unfounded and BTC retraced to now settle near $28,500 as investors await the next batch of companies set to report this week – including AT&T, Bank of America, Goldman Sachs, Johnson & Johnson, Lockheed Martin Morgan Stanley, Netflix, Tesla among others. Investors will also get the latest housing market data on Wednesday as well as an update on retail sales which could help gauge the strength of U.S. consumer spending. Lastly, investors will keep an eye on the latest developments around the Israeli-Palestinian conflict as well as J. Powell’s speech on Thursday, ahead of the Economic Club of New York and just before the start of the Fed’s blackout period leading to its next interest rate decision.
CLIENT PROFITS
We kept our long position in BTC and some Altcoins.
The exposure to the market is 15% of the $AUM, the rest being in cash.
BTC
BTC declined last week, falling below $27,000 with a 2-week low of $26,533 on Wednesday, as markets continued to monitor the latest developments around the Middle East conflict and assessed the deteriorating consumer sentiment data as well as the higher-than-expected U.S. inflation data. The cryptocurrency was trading near $26,860 on Friday, shedding -3.9% over the week.
Price action steadily declined over the week leaving BTC trading near $26,860 on Friday. BTC hovered near $27,000 over the weekend and spiked this Monday, with a high of $29,990 – $30,700 on perpetual futures – as rumors of an incoming Spot BTC approval from the SEC that picked up steam but got later deemed untrue, leaving BTC to retrace and to settle currently near $28,500.
We remain bullish in the very long term but remain bearish in the medium term. Bitcoin hit a 2023 high near $31,818 on July 13 but has struggled to reclaim its $30,000 level since July 23 and is now trading close to $28,500 level with major supports near $24,800 and $20,000 further below.
Besides the approval of spot ETF applications now postponed to early 2024 by the SEC, another variable to take into account could be the evolving situation between Israel and Palestine, which may jolt markets in the coming days. While safe havens like Gold and the U.S. dollar are likely to benefit from a bullish pump, Equities could face headwinds. In that respect, BTC’s case will be interesting to monitor as the asset’s correlation with Equities remains ambiguous during geopolitical crises.
BTC’s 30-day Historical Volatility – HV- steadied around 25% this week, in line with last week’s level.
After ending June up +11.9%, July down -4.1%, and August down -11.3%, BTC ended September up +4.0%. BTC’s performance for October is of +5.6% currently with the YTD performance for 2023 now of +72.0% – from 66.9% the week before.
ETH
Like BTC, ETH lost some ground last week. The cryptocurrency was trading near $1,550 on Friday, shedding -5.7% over the week as markets dealt with the release of robust inflation data and geopolitical tensions in the Middle East.
Like BTC, ETH took a downturn in the wake of growing concerns over the Palestinian-Israeli conflict and continuously printed losses in every trading session but Friday’s to settle near $1,550 on that day. ETH regained over the weekend, and, like BTC, briefly spiked today to then retrace and settle near $1,590 with $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 well 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%, August down -11.3%, ETH ended the month of September up +1.5% and the performance for October is down, currently -4.8%, and the YTD performance for 2023 now of +32.5% – from+32% the week before.
OTHER MARKETS
US Equities, despite encouraging corporate earnings reports, also tumbled in the wake of the latest inflation data and revived fears of further tightening from the Fed as the ongoing geopolitical turmoil in the Middle East could add further upward pressure to prices through oil prices. September PPI rose 2.2% every year, registering the biggest increase since April 2023 while consumer sentiment data fell short of expectations coming out at 63 vs 67.2 expected.
S&P and Nasdaq closed on Friday near 4,327 and 13,407, respectively down -0.4% and -0.2%. Nasdaq reached its resistance level near 13,720 before pulling back and settling near 13,570. S&P and Nasdaq ended the month of September down -6.6% and -5.8%. The performances for October are currently -3.0% and -3.3% and the YTD performances are +13.9% and +29.6% – from +12.9% and +28.8% respectively as of last Monday.
As mentioned in our previous reports, 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 past month of August and September.
DXY
DXY edged moderately higher this week, hitting a high of 106.78 on Friday. The index steadily declined over the week but managed to reverse the trend on Friday, closing near 106.67 from 106.10 the week before.
DXY is currently edging lower near 106.2, confirming above the 105.7 level and its 200-day MA – near 103.2 currently – 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 98.6. On the upside the 109-mark acts as nearest resistance. The index is expected to remain volatile with new geopolitical risks looming and as central banks could adjust their policies later in the year.
US TREASURIES
US Treasury yields wrapped up a choppy week with losses as dovish interventions from Fed officials – indicating interest rates may have peaked – and growing uncertainties around the Middle East conflict sparked a flight to safer assets, helping drive yields down. There is still a strong expectation that rates will remain unchanged in November as markets are currently pricing in a 90% chance of no rate hike during the November FOMC meeting and a 67% chance of no rate hike in December – from 74% as of last week – according to CME’s FedWatchTool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 4.70% and 5.10% from 4.64% and 4.93% last Monday, widening the inversion of the yield curve to 40 bps, from 29 bps last week. The moderate widening of the inverted 2yr -10yr curve is reflecting the recent dovish comments made this past week by Fed officials as well as the rush to safer assets like longer-dated Treasuries following the Israel-Palestine conflict resurgence.
Lastly, on the monthly timeframe, we can notice the shaping of a potential topping tail which could signal a possible bearish reversal.