Market Wrap: Bitcoin and Ether Start the Week Higher

Bitcoin and ether started the week in positive territory as risk assets of various stripes rose. Macroeconomic data will be relatively light this week, although markets will be eyeing Wednesday’s inflation data from Great Britain along with U.S. housing starts on the same day.

The overriding narrative in crypto continues to be its connection with macroeconomic news, particularly on inflation and economic growth. The Oct. 27 release of GDP data will show whether the U.S. economy remains in a recession.

The CME FedWatch tool data shows the possibility of a 50 basis point interest rate hike, although the probability remains low at just 4.6%. The larger takeaway is that a 100 basis point hike no longer seems to be a possibility. Markets are currently assigning a 95% probability the U.S. Federal Reserve’s Federal Open Market Committee will increase rates by 75 basis points in November.

Traditional financial markets were higher, with the Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq and S&P 500 rose 1.8%, 3.5% and 2.7%, respectively.

In commodities, energy markets were mixed. West Texas Intermediate crude and European Brent crude were up 0.57% and 0.61%, while natural gas declined 7.2%. In metals, safe-haven gold rose 1.3% while copper futures increased 0.26%.

Bitcoin traded higher on Monday but stalled as it neared its 20-day moving average. This has been a recurring theme with BTC because the price has essentially traded sideways since mid-June.

By most technical indicators, BTC still appears poised to trade in its current range in the absence of any dramatic catalysts. Recent data releases, such as the Consumer Price Index report last Thursday, have been relatively non-eventful in the aggregate – providing price volatility intraday before reverting to prior levels.

BTC’s price has breached its 10-day moving average, while the 10-day average appears poised to cross the 20-day moving average. Moving average crossovers are often viewed as bullish signals when they occur to the upside, and bearish when they occur to the downside.

Accounting for BTC’s Bollinger Bands implies, however, that BTC is merely continuing a pattern of moving slightly above the average price before declining, and subsequently moving slightly below average before rising again.

The clearest indication of BTC price movement continues to be its relationship to the U.S. dollar, specifically its inverse relationship to the dollar index (DXY). The correlation coefficient between BTC and the DXY is currently -0.81.

The correlation coefficient measures pricing relationships between assets, with 1 representing a direct relationship and -1 indicating a completely inverse relationship. The maximum negative correlation between the two assets was -0.94 in September.

On-chain data is providing early tea leaves that larger BTC holders may be preparing to sell. This would be consistent with recent BTC behavior where profits are scalped after a brief increase above its moving average.

Glassnode’s measurement of “whale” net inflows to exchanges has moved into positive territory after being negative for the prior 30 days. A “whale” is a unique bitcoin entity holding more than 1,000 BTC. Because of their size, whales can sway prices.

The movement of BTC on to exchanges by large investors can signal bearish sentiment, as investors move BTC to exchanges in preparation of selling it.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure the market capitalization weighted performance of the digital asset market subject to minimum trading and exchange eligibility requirements.