Key Takeaways

• Incredibly quiet week, with the CPI the only mover, see BTC chart below

• CPI headline data were bearish assets, stronger than expected

• Crypto majors sold off initially, then turned higher and shorts were squeezed hard

• Alts had sold off quite hard before the data, reversed higher on its release (eg XRP below)

• Data showed ex-food and shelter prices up only 0.1% MoM

• Forward looking indicators for food and shelter are both turning lower

• Vols have continued to sell off as realised volatility drops to 40% between data points

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Looking back

Price action was a complete non-event this week, but the refusal of the crypto market to go down on more bearish news, adds more evidence to the theory that we are a little sold out here in crypto land, and the easiest path is now up.

Our flows showed a strong bias to buy BTC (55.4%) and multiple other coins, notably XRP, DOGE, LINK, BCH, XLM, AVAX, and BNB; while we saw better sellers in LTC and EOS. By region, we had decent buying from Asia and the Americas, better selling from EMEA; by category we had better buying from funds, retail brokers and banks, better selling from OTC brokers.

Futures basis remains stable, with BTC 3 month futures basis remaining around 1.5% annualised, and ETH 3 month basis around -2.5%.

Front end vols continued to sell off, with BTC ATM for 28 Oct down almost 10 vols to 53%, and the equivalent in ETH down 7 vols to 66%. Back end has stabilised, however, with March BTC around 63% and March ETH around 72%.

Looking ahead

Markets like to look well forward of current events, and - stubbornly high CPI data notwithstanding - the fact is that large US corporations are already cutting jobs, and a sharp recession is now a probability. The Fed wishes to avoid a pivot until the latest possible moment because it wants to restore its credibility, but markets look six months ahead, and see that by then this discussion will be in the rear view mirror.

With only 6 weeks to go until December, wider markets are still holding a huge long USD bias, with crypto feeling sold out, and vols in the gutter, I can see front end calls potentially outperforming on any price strength over the next month or so.

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All data sourced from our real time systems supporting global 24/7 crypto liquidity provision

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