BTC and ETH wrapped up 2023 in style as slowing PCE inflation data and dovish Fed’s comments kept prices to their 19-month highs and allowed the two cryptocurrencies to end 2023 up +155% and +90.6%, near $42,260 and $2,280 respectively. However, while BTC completed the inaugural week of 2024 extending the rally and hitting a high of $45,979 on perpetual futures as expectations around a spot BTC ETF approval as early as January 2024 gained further traction, ETH retraced amid a broader market downturn. BTC and ETH were trading near $44,160 and $2,270 on Friday, respectively gaining +4.9% and losing -1.4% over the week.
After ending 2023 on a high, US Equities ended the first week of 2024 with losses and snapped a rally of nine consecutive weeks of gains as investors entered the new year with a predisposition toward consolidation and digested the softening ISM data along with the stronger-than-expected job market data while the unemployment rate remained unchanged at 3.7%. December NFP readings came in much higher than expected at 216,000 – VS 170,000, possibly undermining the narrative of a rates pivot and tempering expectations of a rate cut potentially throughout the first quarter of 2024. S&P and Nasdaq concluded 2023 up +17% and +29.6% but closed out lower on Friday near 4,697 and 14,524, respectively shedding -1.5% and -3.2% for their first week in 2024 while the VIX index picked up moderately near 13.5%, still below its 200-Day MA currently at 15.6%.
US Treasury yields rose following the low jobless claims and the strong NFP report with the 10Y yield reconnecting with the 4% and hitting its highest level since Dec 13 – 4.10%. The 10Y and 2Y yields closed up near 4.05% and 4.38% on Friday from 3.87% and 4.25% the week before. The odds of the Fed keeping interest rates steady at a range of 5.25% to 5.50% in March 2024 are 36% from 53% a month ago, and the probability of a 25bps rate cut now is 61% according to the CME FedWatch Tool.
DXY halted losses and rebounded from its 6-month low to reach a 103.1 high and wrap up the week higher, near 102.44 from 101.38 the previous week following the strong job data, despite a disappointing ISM manufacturing declining to 50.6 in December – 52.6 expected.
Oil prices moved higher on growing concerns over the security of oil shipments amid escalating tensions between Israel and Lebanon and disruptions in shipments following Red Sea ship attacks. The WTI ended the week near $73.9, from $71.3 the week before. WTI price is back near $70 today following Saudi Aramco’s cuts to balance out worries about the supply caused by the increasing geopolitical tension in the Middle East.
BTC and ETH spiked today as rumors of ETF approval picked up steam following crypto-oriented comments from Gary Gensler, with BTC hitting a high of $47,324 and currently exchanging near $46,900 as markets inch closer to the results of the first BTC spot ETF applications and shift their focus to this week’s fresh inflation numbers coming in on Thursday with the release of the CPI data – headline and core expected at +3.3% and +3.8% – followed by Friday’s PPI, gauging wholesale inflation. Investors will also keep an eye on the kick-off of the earnings season with major financials from JPMorgan Chase, Bank of America, Wells Fargo, BlackRock, Citigroup, and Wells Fargo set to report among others.
Client Profits
In response to the inherent volatility tied to the ETF application outcome, we took profits and closed some of our short positions to enable a shift in our trading strategy to day trading. This adjustment is aimed at navigating the market dynamics until the impact of the ETF approval news settles in January.
BTC
BTC wrapped up 2023 in style as slowing PCE inflation data and dovish Fed’s comments kept prices at their 19-month highs and allowed the cryptocurrency to end 2023 up +155%, near $42,260. BTC extended the rally going into 2024 and hit a high of $45,979 as expectations around a spot BTC ETF approval as early as January 2024 gained further traction. BTC was trading near $44,160 Friday, respectively gaining +4.9% over the week.
On the daily chart, BTC price has been ranging between $40,000 and $45,000 since Mid- December, hitting a high of $45,979 last week and is currently trading near $46,900 as the trend on the short and medium term seems to be closely linked to the outcome of a potential approval of pending spot ETF applications from which an answer from the SEC is expected later this week. Other variables to take into account could be the Fed’s monetary policy and its forward guidance for 2024, which may continue to drive markets in the coming weeks.
It will be interesting to watch if BTC can hold on over the $45,000 mark and potentially reach $50,000 upon the approval of a spot BTC ETF and if a driver other than the enthusiasm around a Spot BTC / ETH ETF approval – possibly the looming halving – can maintain the momentum and extend the rally. In that respect, Bitcoin’s market dominance found support near its 200-day MA near 51% on Dec 29 and has been rallying since then to now peak at 54%, suggesting a potential strengthening in anticipation of the Spot ETF approvals and the halving event scheduled for April 2024.
BTC’s 30-day Historical Volatility – HV- steadied to around 45% this week.
After ending December up +12.1% and rounding up 2023 performance to +155%, BTC’s MTD and YTD performances are now at +7.48%.
ETH
In contrast to BTC, ETH did not capitalize on the optimism surrounding a potential Spot ETF approval and declined amid a broader market downturn, aligning with the decrease observed in US Equities over the past week. ETH slipped away from its $2,400 high and hit a low of $2,101 on Wednesday to trade near $2,270 on Friday, shedding -1.4% over the week.
ETH inched lower over the weekend but spiked today in the wake of BTC’s upmove. Price is currently exchanging near $2,340 alongside the ascending support trend line and is currently in the process of regaining the $2,400 while $2,100, $1,900, and $1,750 further below act as main supports.
After ending December up +11.1% and rounding up 2023 performance to +90.6%, ETH’s MTD and YTD performances are now +2.3%.
Other markets
US Equities ended the inaugural week of 2024 with losses and snapped a rally of nine consecutive weeks of gains as investors entered the new year with a predisposition toward consolidation and digested the softening ISM data and the stronger-than-expected job market data while the unemployment rate remained unchanged at 3.7%. December NFP readings came in much higher than expected at 216,000 – VS 170,000, possibly undermining the narrative of a rates pivot and tempering expectations of a rate cut potentially throughout the first quarter of 2024.
S&P and Nasdaq wrapped up 2023 up +17% and +29.6% but closed out lower on Friday near 4,697 and 14,524, respectively shedding -1.5% and -3.2% for their first week in 2024 while the VIX index picked up moderately near 13.5%, still below its 200-Day MA currently at 15.6%.
After ending December up +4.4% and +5.5 with yearly 2023 performance of +17% and +29.6%, S&P, and Nasdaq’s MTD and YTD performances are now -0.7% and -1.7%.
DXY
DXY halted losses and rebounded from its 6-month low to reach a 103.1 high, breaking above its ascending trendline near 102.2 to wrap up the week higher, near 102.44 from 101.38 the previous week following the strong job data, despite a disappointing ISM manufacturing declining to 50.6 in December – 52.6 expected.
The index is now trading near 102.27 just above that ascending trendline near 102.1 but below its 200-day MA currently near 103.4 while the 102 and 100.7 levels act as supports, before the 100-mark that could act as a psychological level, and the 200-week ie 1000-Day MA further below currently near 99.0. On the upside, the 7-day EMA currently near 102.6 could act as the next target.
The outlook could become challenging for the index as the momentum we observed in yields and robust economic data over the past months could now start to wane down and convey a different narrative for investors as inflation pressures cool down.
US Treasuries
US Treasury yields rose following the low jobless claims and the stronger NFP report with the 10Y yield reconnecting with the 4% and hitting its highest level since Dec 13 – 4.10%. The 10Y and 2Y yields closed up near 4.05% and 4.38% on Friday from 3.87% and 4.25% the week before. The odds of the Fed keeping interest rates steady at a range of 5.25% to 5.50% in March 2024 are 36% from 53% a month ago, and the probability of a 25bps rate cut now is 61% according to the CME FedWatch Tool.
The 10Y yield and the policy-sensitive 2Y yield are currently exchanging near 3.99% and 4.34% from 3.87% and 4.25% last week, moderately reducing the inversion of the yield curve to 35 bps, from 38 bps last week. The slight reduction of the inverted 2-year -10-year curve reflects the recent adjustment in investors’ expectations following the strong job market data.