Market Pulse (Week 29, 18/07/2022 – 24/07/2022)

Fed rates decision incoming – how do BTC and ETH react? ETH exchange balance falls to new low likely due to upcoming The Merge catalyst.

Chart(s) of the Week: Fed Rates Decision Incoming

• The major macro event coming up this week is the U.S. Fed interest rate decision on 27 July (Eastern Time). Market expectations are for a 75 bps hike, although some noise of a full 100 bps hike has also been making the rounds. We take a look at BTC and ETH short-term returns (5 and 10 days) around past Fed interest rates decisions in 2022.

• Returns around the first and second decisions in 2022 on 26 January and 16 March, respectively, were mainly positive for both BTC and ETH. Leading up to the third decision on 4 May, returns were positive, but negative after. The most recent decision on 15 June mainly saw all negative returns, although we note the crypto-specific events in DeFi (e.g. stablecoin depegs and DeFi liquidations) in May and June would have impacted returns.

Fund Flow Tracker

• Aggregated exchange balance for ETH made a new yearly low, indicating potential rising inclination to hold, likely on the back of Merge expectations. The past week saw net-inflows of 9.7K for BTC and net-outflows of 2.0M for ETH.

Derivatives Pulse

• Implied vols bounced upwards over the last week, notably for ETH, and term-structure flipped to inverted for both BTC and ETH. 1-week implied vol currently stands at 82.3% (vs. 64.8% a week ago) and 115.6% (vs. 83.3% a week ago) for BTC and ETH, respectively. Skews saw sharp drops indicating increased bidding intensity for calls, particularly for ETH.

• Perpetual futures funding rates continue to print positive for both BTC and ETH over the past week.

• No notable changes seen in CME Bitcoin futures positions over the past week.

• Leveraged traders are typically hedge funds and various types of money managers, including commodity trading advisors and commodity pool operators. The traders may be engaged in managing and conducting proprietary futures trading, and trading on behalf of speculative clients.

• The asset manager category consists of institutional investors, including pension funds, endowments, insurance companies, mutual funds, and those portfolio/investment managers whose clients are predominantly institutional.

• The dealer category consists of participants typically described as the “sell-side” of the market. These include large banks and dealers in securities, swaps, and other derivatives. The other reportable category consists of traders mostly using markets to hedge business risk, and includes amongst others corporate treasuries.

Technically Speaking

• ETH’s upside breakout now includes under its belt a breach of the 50-day moving average and a 10-day vs. 50-day moving average cross. BTC is showing a similar technical picture although it is still testing the 50-day moving average.

Price Movements

News Highlights

• Tesla sold 75% of its Bitcoin holdings in order to maximise cash position due to impact on operations of ongoing COVID lockdowns in China, according to the company.
• U.S. Purchasing Managers Index (PMI) composite flash contracts in July to lowest level seen in over 2 years, according to data from S&P Global.
• European Central Bank (ECB) raised its interest rate by 50 bps, higher than expectations, and for the first time in 11 years. This ends the negative interest regime that had been in place since 2014.

Catalyst Calendar

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Author

Research and Insights team