Chart(s) of the Week: Walking a Macro Tightrope 

• The U.S. Federal Reserve and other central banks including Bank of England (BoE) and Swiss National Bank (SNB) are raising policy rates amidst a complex economic outlook. Markets are facing a combination of slowing growth momentum and inflation, exacerbated by supply chain shortages, resulting in rising risks of global stagflation. The key question for investors is whether central banks can tighten financial conditions without triggering a recession.

• However, despite the severe price drawdown in crypto brought about by macro headwinds and compounded by negative developments in DeFi, some Bitcoin on-chain activity metrics are showing positive signs - for instance, total balance in accumulation addresses has been trending upwards.

Fund Flow Tracker

• Aggregated exchange balances for BTC fell to new lows, while ETH’s increased during the past week, with net outflow of -52.2K for BTC and net inflow of +596.0K for ETH. Balances held on OTC desks continued to fall over the last week.

Derivatives Pulse

• Options implied volatilities (vol) for BTC and ETH saw parabolic spikes again last week. 1-week implied vol as of 17 June stands at 96.3% (vs. 66.7% a week ago) and 125.3% (vs. 89.1% a week ago) for BTC and ETH, respectively. Current vols as of writing are even higher. Near-term macro risks remain tilted to the downside and developments in DeFi are negatively impacting sentiment.

• The put-call ratio for BTC remains at elevated levels. ETH’s put-call-ratio continues to fall, potentially indicating some easing back in exposure hedging.

• Buying protection is becoming even more expensive, as option skews have also exploded to the upside, and are currently at the highest levels YTD.

• BTC and ETH perpetual futures funding rates turned negative during the past week, implying some shifting to short positioning.

• Leveraged traders’ net-short position in CME Bitcoin futures has reduced since mid-May 2022.

• 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

• BTC has found support at the 200-week moving average (MA) in recent years, and the bear market lows in December 2018 and March 2020 were at this moving average level. BTC has currently breached the 200-week MA and chartists will be looking carefully at whether a bounce is on the cards.

Price Movements

As of 19  Jun 2022     Source: CoinGecko.com

Source: Crypto.com

News Highlights

• The U.S. Federal Reserve raised policy rates by 75 basis points in a continuous attempt to curb inflation. Similarly, the Bank of England and Swiss National Bank moved in lockstep, raising 25bps and 50bps respectively. The European Central Bank has confirmed its intention to hike rates by 25bps.

• Extreme market conditions and a difficult macroeconomic climate have prompted the unwinding and deleveraging of trades by various financial institutions and crypto lenders. 

Catalyst Calendar

* Consensus forecasts from CME FedWatch Tool; dates shown are for Hong Kong time zone (GMT+8)

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