BTC and ETH were mixed over last week, with BTC briefly surpassing $31,800 on Thursday but then encountering a setback on Friday and falling back down to a key support level near $30,000. BTC and ETH were trading near $30,335 and $1,940 on Friday, respectively ending the week mixed, down -0.02% and up +3.7% as markets digested the latest developments on the XRP ruling with Judge Torres’s decision to partially not consider the token as security in Ripple Labs’ court case against the SEC, and the recent Coinbase users’ account closure by Bank of America, highlighting the challenges faced by banks in accepting digital assets.
US Equities rallied last week with S&P and Nasdaq closing near 4,505 and 14,113, up +2.4% and +3.3% as markets dealt with the first batch of corporate earnings and the latest sentiment and inflation data: U.S. consumer sentiment preliminary reading for July jumped from 64.4 in June to 72.6 – the highest level since September 2021 – and CPI data confirmed the cooling of inflation, slowing to 3%, less than the 3.1% expected, its lowest level on an annual basis since March 2021 – core CPI 4.8% vs 5% expected.
US Treasury yields dropped last week while the dollar tumbled after inflation slowed more than expected in June, easing pressure on the Fed to keep raising interest rates despite the hawkish comments made by Fed Official Waller suggesting more rate hikes may be needed later in the year. Markets are now pricing in a 96% chance of a 25-basis point hike during next week’s FOMC meeting in late July, according to CME’s FedWatchTool, which would bring the target rate to 5.25% – 5.50%. DXY index tumbled last week, ending near 99.96 from 102.27 the week before.
Oil price gained, exchanging near $75.16 on Friday, with price benefitting from a softening US dollar as an end to the Fed rate-hiking cycle later in the year becomes more likely.
BTC and ETH are up as investors brace for a busy week where major companies are set to report – Bank of America, Morgan Stanley, Goldman Sachs, Tesla, and Netflix among others. This week will bring a batch of fresh economic data with Tuesday’s retail sales for June and the latest housing market data from June – housing starts, existing home sales, and housing market Index – to better assess the state of the US economy and consumer spending ahead of next week’s FOMC meeting.
CLIENT PROFIT
We took profits by selling our long positions on some large caps – MATIC and ADA – last week.
We also took additional profits on MATIC by opening a new short when Alt coins pumped last Thursday and took profits on that position in the latter part of the week.
We kept our short position on BTC and added to our short position on ETH when ETH neared $2,010 last week.
The exposure to the market is 14% of the AUM, the rest being in cash.
BTC
BTC edged lower over last week, briefly surpassing the $31,800 on Thursday but then encountering a setback on Friday and falling back down to the key support level near $30,000, ending the week close to flat near $30,335 on Friday, down -0.02% as markets digested the latest developments in the XRP ruling with Judge Torres’s decision to partially not consider the token as a security in Ripple Labs’ court case against the SEC, while the recent Coinbase users’ account closure by Bank of America highlighted the challenges faced by banks in accepting digital assets.
BTC is currently trading near $30,000 while price action started to test below the narrow range between 30,000 and 31,000 it was trading over the past weeks.
Like in April, BTC failed to confirm above the $31,000 resistance last week for more than a couple of days and the bearish divergence we mentioned in our last reports between money supply and US Equities could potentially add more selling pressure in the coming weeks. We remain bullish on the very long term but remain however bearish on the medium and short term. There is a risk of a dropback if BTC doesn’t find the momentum to break through to the upside with major supports near $28,000, $25,000, and $24,000 further below.
BTC’s 30-day Historical Volatility – HV- increased slightly over the past week and is now nearing 38% – from 36% last week.
ETH
ETH also benefitted from last Thursday’s rally but, unlike BTC, managed to limit the losses during Friday’s session finding support near the $1,940, ending the week up +3.7%.
ETH edged lower over the weekend, inching closer to $1,900, and is now back to last week’s level near $1,890, retesting its MA100 near $1,860, with the 200 MA acting as major support currently near $1,740. The 200 MA is a strong indicator of the overall trend, if ETH breached below that level, the price could move downwards towards its next support near $1,715 and $1,370 further below.
ETH’s performance for June was +3.2% and the MTD performance for July steadied at -2.2%, with the YTD performance being +58%.
OTHER MARKETS
US Equities rallied last week with S&P and Nasdaq closing near 4,505 and 14,113, up +2.4% and +3.3% as markets dealt with the first batch of corporate earnings and the latest sentiment and inflation data: U.S. consumer sentiment preliminary reading for July jumped from 64.4 in June to 72.6 – the highest level since September 2021 – and CPI data confirmed the cooling of inflation, slowing to 3%, less than the 3.1% expected, its lowest level on an annual basis since March 2021 – core CPI 4.8% vs 5% expected.
S&P and Nasdaq’s MTD performances for July are back in positive territory, currently at +1.7% and +3.4%, and the YTD performances are +18% and +36% – from +15% and +31% 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 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 widened over the past week with the latest inflation data and corporate earnings propelling prices upwards.
DXY
DXY index dropped last week, ending near 99.96 from 102.27 the week before. The index dropped further below its MA50 – then at 102.7 – breaking important support at 101 during Wednesday’s session and continued to trade downward over the rest of the week just below the 100 mark on Friday. The drop came as the low CPI numbers in the US triggered a reversal in rates markets and a decline in the value of the Dollar.
DXY is currently testing the 100 level with 100.7 acting as the nearest resistance and on the downside, the 99.3 mark could act as a psychological level before the 200-Week ie 1000-Day MA further below currently near 98.3 The index is expected to remain volatile as other central banks could adjust their policies later in the year.
US TREASURIES
US Treasury yields dropped last week while the dollar tumbled after inflation slowed more than expected in June, easing pressure on the Fed to keep raising interest rates despite the hawkish comments made by Fed Official Waller suggesting more rate hikes may be needed later in the year. Markets are now pricing in a 96% chance of a 25-basis point hike at the next FOMC meeting in late July, according to CME’s FedWatchTool, which would bring the target rate to 5.25% – 5.50%.
The 10Y yield and the policy-sensitive 2Y are currently exchanging near 3.81% and 4.74% from 4.00% and 4.87% Monday, widening the inversion of the yield curve to 93bps, from 87 bps last week.