ARK Invest’s Cathie Wood says a recession will hit the US in 2024 due to what she believes was overly aggressive interest rate hiking from the Federal Reserve. In a new YouTube update, Wood says that the US is already in a “rolling recession,” or a downturn that affects certain sections of the economy at […]
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Banking giant Goldman Sachs says that China is weathering the biggest capital flight since 2016 amid struggling equities markets. In a report seen by the South China Morning Post (SCMP), Goldman says foreign investors sold off a net total of $3.3 billion in domestic Chinese stocks, bringing the total outflows for October to $5.1 billion. […]
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BTC investor sentiment turns increasingly bullish after this week’s quick rebound from a sharp price correction.
Bitcoin (BTC) experienced a 5% increase after testing the $25,000 support level on Sept. 11. However, this breakout rally doesn't necessarily indicate a victory for bulls. To put today’s price action in perspective, BTC has witnessed a 15% decline since July. In contrast, the S&P 500 index and gold have maintained relatively stable positions during this period.
This underperformance demonstrates that Bitcoin has struggled to gain momentum, despite significant catalysts such as Microstrategy's plan to acquire an additional $750 million worth of BTC and the multiple requests for Bitcoin spot ETFs from trillion-dollar asset management firms. Still, according to Bitcoin derivatives, bulls are confident that $25,000 marked a bottom and opened room for further price gains.
Some argue that Bitcoin's primary drivers for 2024 are still in play, specifically the prospects of a spot ETF and the reduction in supply following the April 2024 halving. Additionally, some of the cryptocurrency markets’ immediate risks have diminished following the U.S. Securities and Exchange Commission (SEC) experiencing partial losses in three separate cases involving Grayscale, Ripple and the decentralized exchange Uniswap.
On the other hand, bears have their own set of advantages, including the ongoing legal cases against leading exchanges like Binance and Coinbase. Moreover, there is the troubled financial situation of the Digital Currency Group (DCG) after one of its subsidiaries declared bankruptcy in January 2023. The group is burdened with debts exceeding $3.5 billion, potentially leading to the sale of funds managed by Grayscale, including the Grayscale Bitcoin Trust (GBTC).
Let's look at derivatives metrics to understand better how professional traders are positioned in the current market conditions.
Bitcoin monthly futures typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement. As a result, BTC futures contracts should typically trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.
It's worth noting that the demand for leveraged BTC long and short positions through futures contracts did not have a significant impact on the drop below the $25,000 mark on Sept. 11. However, the BTC futures premium continues to hover below the 5% neutral threshold. This metric remains in the neutral-to-bearish range, indicating a lack of demand for leverage long positions.
To gauge market sentiment further, it’s also helpful to look at the options markets, as the 25% delta skew can assess whether the retest of the $25,000 has made investors more optimistic. In short, if traders expect a drop in Bitcoin’s price, the skew metric will rise above 7%, while periods of excitement typically have a negative 7% skew.
The situation underwent a notable shift on Sept. 11, as the 25% delta skew metric, which previously indicated a 9% premium on protective put options, suggesting investors were expecting a correction, has now leveled off at 0. This indicates a balanced pricing between call and put options, implying equal odds for both bullish and bearish price movements.
Given the uncertainty on the macroeconomic front, particularly with the upcoming release of the inflation CPI report on Sept. 13 and retail sales data on Sept. 14, it's likely that crypto traders will be cautious and prefer a "return to the mean." In this context, the mean represents the predominant trading range of $25,500 to $26,200 observed over the past couple of weeks.
However, from a bullish perspective, the fact that derivatives markets held up during the dip below $25,000 is a promising sign. In other words, if bears had significant conviction, one would expect a stronger appetite for put options and a negative BTC futures premium, known as "backwardation."
Ultimately, both bulls and bears have significant triggers that could influence the price of Bitcoin, but predicting the timing of events such as court decisions and ETF rulings is challenging. This dual uncertainty likely explains why derivatives metrics have remained resilient, as both sides exercise caution to avoid excessive exposure.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Several macroeconomic indicators suggest that bearish headwinds could strengthen during the remainder of 2023 and possibly negatively impact the crypto market.
2023 has been a whipsaw year for investor sentiment and even though equities markets have defied expectations, a recent report from ARK Invest highlights reasons why the remainder of 2023 could present several economic challenges.
ARK manages $13.9 billion in assets, and its CEO, Cathie Wood, is a strong advocate for cryptocurrencies. In partnership with the European asset manager 21Shares, ARK Investment first applied for a Bitcoin exchange-traded fund (ETF) in June 2021. Their most recent request for a spot BTC ETF, which is currently pending review by the U.S. Securities and Exchange Commission (SEC), was initially filed in May 2023.
Despite ARK’s bullish view on Bitcoin which is supported by their research on how the fusion of Bitcoin and Artificial Intelligence could transform corporate operations by positively impacting productivity and costs, the investment firm doesn't foresee a straightforward path for a Bitcoin bull run given the current macroeconomic conditions.
In the newsletter, ARK cites several reasons for their less than optimistic scenario for cryptocurrencies, including interest rates, gross domestic product (GDP) estimates, unemployment and inflation. One point is that the U.S. Federal Reserve (Fed) is implementing a restrictive monetary policy for the first time since 2009, as indicated by the "Natural Rate of Interest."
The "Natural Rate of Interest" is a theoretical rate at which the economy neither expands or contracts. ARK explains that whenever this indicator exceeds the "Real Federal Funds Policy Rate," it puts pressure on lending and borrowing rates.
ARK anticipates that inflation will continue to slow down, which would drive up the "Real Federal Funds Policy Rate" and increase the gap above the "Natural Rate of Interest." Essentially, the report holds a bearish macroeconomic view due to this indicator.
The analysts also focused on the divergence between real GDP (production) and GDI (income). According to the report, GDP and GDI should closely align, as income earned should equal the value of goods and services produced.
However, the most recent data shows that Real GDP is approximately 3% higher than Real GDI, indicating that downward revisions in production data should be expected.
Another focus point was U.S. employment data and the analysts note that the government has consistently revised these figures downward for six consecutive months.
The chart above highlights a labor market that appears weaker than initial reports indicated. The fact that the last time six consecutive months of downward revisions occurred was in 2007 just before the onset of the Great Financial Crisis is also notable.
Related: Bitcoin short-term holders capitulate as data highlights potential generational buying opportunity
Another bearish development to keep an eye on is “stagflation.” The writers highlight the reversal of the year-long trend of price discounts driven by increased consumer spending. Referencing the Johnson Redbook Index, which encompasses over 80% of the "official" retail sales data compiled by the U.S. Department of Commerce, it becomes clear that total same-store sales rebounded in August for the first time in 12 months, suggesting that inflation may be exerting upward pressure.
The metrics suggest that ongoing macroeconomic uncertainty could continue in the coming months. However, it does not provide a clear answer regarding how cryptocurrency investors might react if this trend confirms lower economic growth and higher inflation – a scenario typically considered highly unfavorable for risk-on assets.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
America’s national debt is rising at a rapid rate. The government’s FiscalData platform shows $116 billion has been added to the country’s total public debt since the start of August, bringing the grand total to $32.7 trillion. The rise comes amid a fresh fiscal warning from the Heritage Foundation. The conservative think tank’s EJ Antoni […]
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The banking giant UBS is facing a hefty fine from the US Department of Justice for its role in the Great Financial Crisis of 2008. The DOJ says UBS has agreed to pay $1.435 billion in penalties to settle allegations that the bank defrauded investors while underwriting and issuing residential mortgage-backed securities (RMBS) in 2006 […]
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The US will most likely head into a slight recession early next year, according to Bank of America Chairman and CEO Brian Moynihan. In a new FOX Business interview, Moynihan says that the Federal Reserve’s late start to fighting inflation and subsequent aggressive interest rate hikes will probably cause a recession by Q1 of next […]
The post Bank of America CEO Forecasts US Recession in Early 2024 After Fed Hikes Rates to 22-Year High appeared first on The Daily Hodl.
Former US congressman Ron Paul says the US dollar is overdue for a major downturn in the face of out of control debt. In a new discussion on his YouTube channel, Paul says the reason that central banks and even private citizens have increased their gold reserves is a waning confidence in the US dollar. […]
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Bitcoin bears are closing in on a rare win, as they have the advantage in this week’s $600 million BTC options expiry.
This week’s Bitcoin (BTC) options expiry on Friday, July 21, could solidify the $30,000 resistance level and give the bears the upper hand for the first time since the 21% rally between June 14 and June 21.
A review of Bitcoin’s recent price action shows that three out of the last four BTC options expiries triggered significant price movements, making it crucial for traders to pay close attention to these events.
Notably, Bitcoin’s price has consistently shown strong reactions following the weekly 8:00 am UTC options expiry. While causation cannot be established, the magnitude of these price swings warrants extreme caution leading up to the weekly expiry on July 21.
While this week’s options expiry could give bears control of Bitcoin’s price in the short term, bulls have the potential advantage of the United States Securities and Exchange Commission reviewing spot exchange-traded fund proposals.
Although these proposals are still in the early stages of regulatory scrutiny, the slow progression could partially explain why the bears have managed to defend $31,000 multiple times since late June.
However, their best chance of keeping Bitcoin’s price below $30,000 lies in the worsening regulatory environment. On July 19, the global securities exchange Nasdaq suspended the launch of its cryptocurrency custodian solution due to a lack of regulatory clarity in the United States. This change of plans was justified by Nasdaq’s CEO, Adena Friedman.
Related: Bipartisan bill to regulate DeFi, crypto security risks introduced into US Senate
Furthermore, on July 14, cryptocurrency exchange Coinbase announced the suspension of its staking services for clients in California, New Jersey, South Carolina and Wisconsin. This decision followed a June 6 lawsuit from the SEC that accused the exchange of operating as an unregistered security broker since 2019.
Bitcoin’s price briefly surpassed $31,000 on July 13 and July 14, fueling bullish bets by traders using options contracts. However, a four-hour correction brought the price back down to $30,000.
The 0.39 put-to-call ratio reflects the difference in open interest between the $430 million call (buy) options and the $170 million put (sell) options. However, the outcome will be lower than the $600 million total open interest since the bulls were overconfident.
For example, if Bitcoin’s price trades at $30,500 at 8:00 am UTC on July 14, only $18 million worth of call options will be accounted for. This distinction arises from the fact that the right to purchase Bitcoin at $31,000 or $32,000 becomes invalid if BTC trades below those levels upon expiration.
Below are the three most likely scenarios based on the current price action. The number of options contracts available on July 21 for call (buy) and put (sell) instruments varies depending on the expiration price. The imbalance favoring each side constitutes the theoretical profit:
Considering the recent weak macroeconomic indicators, it’s likely that bears will continue suppressing Bitcoin’s price until Friday’s expiry. Moreover, China’s second-quarter gross domestic product grew by 6.3% year-on-year, falling short of the 7.3% market expectation. Meanwhile, U.S. retail sales in June increased by 0.2% from the previous month, below the 0.50% consensus.
Consequently, the bulls find themselves in a challenging position, as their call (buy) instruments will be invalidated if Bitcoin’s expiry price falls below $30,000. Therefore, the bears’ $35 million favorable outcome may not be a significant win, but it does increase the chances of $30,000 becoming a new resistance area.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
An economist at the world’s largest credit ratings agency says the US dollar’s global reserve currency status is now in the process of fading away. Paul Gruenwald, Standard and Poors Global’s (S&P) chief economist, said at a conference in London that the dollar “doesn’t have quite the pull it used to,” reports Reuters. With “a […]
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