Alpha Navigator: Quest for Alpha [January 2024]

Fed signals rate cut in March unlikely. Asset class performance was mixed in January, with crypto and equities up slightly.

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Executive Summary

• Asset classes were mixed in January, with crypto and equities (except Emerging Markets) posting slight gains.

• The US Federal Reserve (Fed) kept its key interest rate target range unchanged between 5.25% and 5.5% at its latest meeting on 31 Jan. Market participants were focused mostly on Fed Chairman Powell’s comments about the timing of potential future interest rate cuts. He highlighted that the Fed is looking for a sustainable downward path for price increases in order to feel certain that inflation will remain sustainably below its 2% target. Powell also said that cuts at the central bank’s next meeting in March are unlikely. 
• US inflation has been falling, but is still above the Fed’s 2% target. The Core Personal Consumption Expenditures (PCE) price index, which excludes volatile food and energy prices and is a closely watched inflation gauge in the US economy, was up 2.9% YoY in December.
• Key macro events coming up in Feb include new US inflation data, FOMC minutes, and the ECB’s next interest rate decision.
• BTC correlations with equities were mostly negative in the past 1 month.

• BTC options implied volatilities (vols) spiked during the early part of last month, but have since retreated.

• Market-Neutral Pair Trader hunts for strongly correlated tokens and potential market-neutral pair trades.

• For the DOT vs. OP pair,In the last month, the price ratio (DOT price divided by OP price) fell and is now near the 2-standard deviation (SD) floor.

• Our style-factor screens track momentum, value, growth, and risk for the Layer-1 and Layer-2, DeFi, Gaming, and NFT categories. Below is the screen for selected top crypto tokens by market cap in the Layer-1 and Layer-2 category. Token prices mostly fell in Jan. ARB led significantly with a positive gain at +27.0%.

• Our events section shows recent and upcoming events for selected tokens, as well as important macroeconomic events.

Read the full Alpha Navigator report: Alpha Navigator: Quest for Alpha [January 2024]

Author

Andrew Ho (Senior Research Analyst)

Research & Insights Team

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