Market
Hello, this is the beginning of April. April certainly got off to a bad start for BTC. We were unable to defend the $70,000 level and ended up falling 10%. Not much has changed between now and 3 weeks ago. BTC is still trading sideways and the upward trend is alive. I have provided feedback to the community, but my priority is triangular convergence. I also believe that the current decline is the last correction before heading towards $80,000+. If there is one more decline, it is best to protect $62,000-$63,000. If this level is broken, BTC is likely to see further declines and we expect the game to get tough.
There is no telling how long this correction will last, but it seems unlikely that BTC will fall to the $52,000 level that people are expecting. Of course, there is a possibility of such a thing happening, but I think it is a very unnatural decline.
Although I may very well be wrong with this BTC analysis, I still think BTC will reach $80,000 in April. I’ll leave additional comments if it becomes clear that I’m wrong and that it will take longer. To be honest, we don’t know right now whether Q2 market will be boring.
Let’s look at the market from an order book perspective. As I mentioned last week, there were many sell orders in the $71,000+ price range on Coinbase and Binance exchanges, which have the highest trading volume. A strong buying trend was needed, but that did not happen. The current situation has not changed much from 3 weeks ago.
There are still many buy orders on Binance in the $60,000+- price range. If BTC falls to that price, we will watch to see if the buying that defended the $61,000 level two weeks ago emerges. Spot buying is currently occurring at the $64,000 level.
The reason the market is falling this week appears to be because expectations for an interest rate cut have decreased. Looking at the ISM released yesterday, it exceeded 50 points for the first time since September 2022. The announcement sent Treasury yields and the dollar higher. It appears that expectations of an interest rate cut have clearly decreased. But if you think about it a little differently, you can see that the economy is strong. As I have said time and time again, it is very likely that there will be no recession in 2024. Orders are increasing and companies are continuing to grow.
From the beginning, it did not make sense that the interest rate cut would occur in March. Understand that the market always has excessive expectations. There is a possibility that there will be no interest rate cut, but I am still looking forward to the third or fourth quarter. However, interest rates will not return to the zero interest rate era for the time being.
This decline is making the market healthy. Overheated funding and futures market indicators are normalizing. To be honest, I don’t pay much attention to funding, but it is sometimes an indicator of the market top.
The dollar has been rising since last week and paused around 105 points. In particular, countries with a large interest rate difference between the two countries, such as USD/KRW, are experiencing greater currency devaluation. Also on Monday, Treasury yields suddenly rose significantly, moving 2.5% in one day. I was shocked and honestly, this scenario was not in my mind. This move continued on Tuesday, with market nuke.
There are many speculations, but I do not think the current situation is a systemic risk. It appears that this is a reaction to decreased expectations of an interest rate cut. In addition, currency value re-evaluation due to interest rate cuts that are later than expected. Additionally, there is Chairman Powell’s speech today. This speech is likely to move yields, so watch the movement closely.
It is a very unusual phenomenon for gold, yield, and the dollar to rise at the same time. This is because they generally have an inverse correlation. Currently, “debt monetization” continues to progress around the world, and the United States is at the center of it. They must continue to issue more dollars to service their existing debt. Currently, the United States has fewer and fewer buyers of government bonds and must increase its debt to repay existing debt. And, as most predict, the debt will continue to grow.
After 2008, QE began in earnest and BTC was born. Current government debt is simply unsustainable. So I think the current situation is pushing gold higher. Also, as I mentioned in last week’s article, I believe that a new cycle has begun for gold, and that everything will ultimately go higher. The rate at which all fiat currencies become trash seems to be accelerating further.
I could be wrong, but I think this is the main reason why BlackRock CEO Larry changed his view on BTC.
NFP will be announced this Friday. Potential volatility is expected as employment is currently a market concern and will influence interest rate decisions. If lower than expected or previous figures are announced, the market is likely to rise.
ETF Flow
ETF inflows remain significantly reduced compared to the strong January-February period. Although there was a $90M outflow from the ARK ETF today, no other ETFs are experiencing significant outflows yet. If there are outflows from IBIT and FBTC this week, the market is likely to react to such news as it affects the psychological factors of investors. The Bulls won’t want that to happen.
ETF inflows won’t always stay high or increase indefinitely, so get used to the current situation. At some point, large outflows from ETFs will inevitably occur. What is clear is that ETFs will continue to benefit BTC in the long term. Don’t worry too much.
Options Market
There is nothing special about the options market. Very quiet and still 70 handle. The positioning is very mixed, but put options are slowly gaining popularity. In the options market, ETH is particularly weaker than BTC. I think the weak performance of ETH/BTC continued to have an impact on people’s positioning as the odds of ETF approval dropped in May.
Vol seems likely to fall slightly from the current level as BTC is likely to move sideways a little more. It seems that people will increasingly prefer selling options as VRP is high. To be honest, I too am hoping for some cooling. However, if BTC rallies to $80,000 in April contrary to people’s expectations, I think Vol could go higher again due to the halving narrative.
Overall, short-term skewness is bearish, but long-term calls on BTC, such as the $200,000 call, are still being bought. As of last week, it is worth $10M with almost 1,000 contracts. It feels like a strong belief that BTC will rise in the long term.
Last week, there were certainly traders who used the Risk Reversal strategy for a downside reversal, but today there is someone who used it for a bullish reversal. Sell a $64,000 put option and simultaneously buy a $71,000 call option.
Have a great week everyone!
NFA DYOR 🙂
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