TA Tuesday: Bitcoin drops below $40,000 amidst fears of rising inflation

At the time of writing, $BTC is trading at $39.9K (-12.3% in 7 days), $ETH is trading at $3K (-12.05 in 7 days), and the spread ETH/BTC is trading at 0.07506 (0.24% in 7 days).

Since the macro environment is still dominating the space, volatility has subsided and most spot cryptocurrency prices are fluctuating in tight windows.

Having said that, though, with fears that rising inflation and the Federal Reserve’s plans to aggressively tighten monetary policy, which could slow economic growth, the bond market has/is reacted/ing strongly.

Investors have sold short-term government bonds in favour of long-term debt, causing Treasury yields to invert.

Inverted yield curve: although this is typically viewed as an indicator of a looming economic contraction, it could take a few years before an economic downturn takes hold.

 

 

US Government Bond Yields Rising: the 10-year US government bond yield broke the nearly 45° downtrend that began in 1988 amid potentially dramatic inflation numbers, and is now trading at 2.774% (3-year high). Likewise, both the 5Y and the 30Y are trending upward and the term-structure is now in backwardation!

Betting on the reversal of yields could certainly return the term-structure to contango, but fears of a recession and a major rotation towards short-term „safe haven“ assets is still ongoing.

And now for crypto:

BTC

On the spot side: $BTC 1d chart with Heiken Ashi candles suggests that the downtrend could last a bit longer as intraday volatility (open-close spread) continues being high.

Similarly, as Ichimoku clouds called for a short on April 6 at $45.5K, both the oscillators (RSI, CCI, etc.) and the moving averages are in favour of a sell.

Looking at the Volume Profile Visible Range (VPVR):

Supports: $38k – $35k

Resistance: $47k – $50k

On the derivatives side: The BTC Futures Annualised 3mth basis rapidly turned back as momentum disappeared. They are now trading on CME at 1.99%; similarly, funding rates are quite negative on all the venues.

On the options side: while at-the-money implied volatility is almost unchanged week-over-week and is now trading at 65% for 3-month maturities, this suggests once again that this consolidation period could last a few more weeks. The skews are trading in favour of puts for all maturities with 3mth 25D skew trading at 8% as investors are looking for downside protection.

The Open Interest (OI) profile shows – once again – strong support at 40k and resistance at 50k. The greater OI in OTM Calls at $60k, $70k, and $80k is coming from both cheap volatility buys and calendar spreads.

Also, looking at the OI by expiry, 2022-04-29 is the one with the higher OI – excluding the one in June – and it shows a huge interest in 50K calls: hard and early to declare that this is going to be a catalyst.

ETH

On the spot side: $ETH 1d chart with Heiken Ashi candles suggests that the downtrend could last a few more days as the intraday volatility continues being high (even if candles calling for long/short positions are not always correct…)

Similarly, as Ichimoku clouds called for a short on April 6 at $3.3K, both the oscillators (RSI, CCI, etc.) and the moving averages are in favour of a sell.

Looking at Volume Profile Visible Range (VPVR):

Support: $2.6k

Resistance: $3.5k

On the derivatives side: The ETH Futures Annualised 3mth basis almost followed BTC’s, and are now trading on CME at 2.3%. Similarly, the funding rates keep being negative on all the venues.

On the options side, the stronger consolidation of spot prices allowed the IV to drop lower and is now trading at 73% for 3-month maturities. This is nearly an all-time low!

Given the ETH/BTC spread, coupled with „low“ ether transactions costs, and the expected merge (excluding surprise factors), this might be the time for ether to regain some value against other L1s.

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