CryptoBits: Crypto Consolidates Ahead of Fed

Written by
Adam Farthing


January 30, 2023

Key Takeaways

  • A week of consolidation with a BTC high just shy of $24k
  • ETH again underperforms; cross drops to low around 0.0680
  • Derivatives markets little changed
  • Markets await the Fed midweek

Looking back

The theme of the week was consolidation, with ETH continuing to marginally underperform, while a handful of mid-caps made fresh recent highs.  BTC stayed inside $22.5k-$23.5k most of the week, before a push to touch $24k late Sunday, while ETH struggled above $1,650 all week. Matic broke through $1.05 resistance level to a high of $1.20, while AVAX broke through $19 to trade almost to $22.

We saw balanced flows in the majors, with better buying in XRP and MATIC, and better selling in LINK and DOT.  Better buying came from APAC and EMEA, and marginally better selling from the Americas.  Crypto exchanges and banks were relatively strong buyers.  

Better buying in XRP, MATIC and XLM with better selling in LINK and DOT

Futures markets have also shown relative stability, with the basis for March contracts stable around +4.25% and +3.0% respectively for BTC and ETH on major exchanges.  

Option markets have also struggled to provide many clues, with vol selling off in the front during last week's range trading as market makers struggled to pay decay, although the curve rallied and briefly inverted over the weekend as BTC threatened the highs at $24k.  BTC options for 03 Feb now price at about 6-7 vol premium to 10 Feb, showing the importance the market is attaching to the Fed meeting this Wednesday.

Looking ahead

This week will be all about the Fed, which the market is expecting to raise by 25bp, given the softer recent inflation numbers.  Bond markets are pricing a rather optimistic scenario of softer inflation and a soft landing, so it is plausible that Powell might surprise some of us with a little hawkish rhetoric, in which case risk in general could take a hit.

It feels somewhat harder to see how Powell could surprise the markets with dovishness.  Given that, one might expect a little squaring of positions this week, and presumably short term players are long.

Buy/Sell Ratio by Category

Crypto exchanges and banks were relatively strong buyers

Buy/Sell Ratio by Region

Better buying from APAC and EMEA with marginally better selling from the Americas

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