Daily News | The Rally On Thursday Was A Short-Squeeze And The US Bond Markets Indicate Further Declines Are Yet To Come

Fundamental & Technical Outlook

👓 Macro

The sharp plunge during Thursday's U.S. Open which also led to a near-meltdown for cryptocurrency markets with BTC and ETH declining 5% and 7.8% at one point, led to U.S. options traders quickly starting to sell their puts.

As options traders sold these puts, market makers were forced to unwind hedges and buy the S&P 500 futures, helping fuel the rally in the equity market, which led to a major comeback for the cryptocurrency sector.

By Friday, implied volatility had reset, allowing the sellers to reclaim market control in U.S. equity markets. Wall Street closed lowered on Friday with the DJIA (-1.34%), S&P 500 (-2.37%) and Nasdaq (-3.08%) all coming back down from the week's high.

On the other hand, the bond market understood the CPI data very well. Currently, the odds for a 75 bps Fed rate hike in November have climbed to 97%, as the odds of a 75 bps rate hike in December rose to around 70%.

The repricing of Fed Fund Rates from 4.67% on Oct. 12 to 4.95% on Oct. 14 pushed the US 2-Yr Treasury rate up to 4.5% from 4.29%. ****

The rise in rates in the bond market signaled that the Fed would have to increase monetary tightening, and tighter conditions in the financial markets suggest that equities should be falling. It also served as a non-confirmation of the equity market rally and an indication that the rally made zero sense and would not last.

Why this matters: bonds and equities move in an inverse direction, and equities and cryptocurrencies correlate closely, which means to gauge where the market is headed we must keep a lookout for treasury yields, particularly that of the U.S. as it reflects the market sentiments toward Fed rate hike and inflation in advance.

As of this writing, Bitcoin (BTC) was trading at $19,176 and Ether (ETH) was changing hands at $1,296, or up 0.28% and 1.15% in a 24hr period, respectively.

Notably, Quant Network (QNT) was up 5.9%, Synthetix (SNX) +8.88%, and Casper (CSPR) +15.14%.

🟠 BTC Weekly Timeframe

As of Oct. 17 Asian session, Bitcoin (BTC) was trading above the 23.6% (19,144) weekly Fibonacci Retracement level measured from Sep. 12 - 19.

Throughout the past week, BTC consistently traded below said level, and having a weekly candle close above it is a good sign for the bulls. Though, notably, the weekly candle is still a bearish one which indicates the sellers still have an advantage.

This week, it’ll be crucial for the bulls to not only keep the price above the 23.6% level but also to use it as an anchor to push the price above the 38.2% (19,792). Conditions would shift to a more bullish outlook if we see this week’s candle close above the 38.2% due to the price action formation of a “higher-high” wave.

BTC Weekly Resistance zones

1. 19,667 - 19,792
2. 19,951 - 20,331

BTC Weekly Support zones

1. 19,144 - 18,472
2. 18,143 - 17,700

BTC Daily Timeframe

As of this writing on Oct. 17 00:21 UTC, Bitcoin (BTC) was trading at $19,252 (+0.74%) in a 24hr period.

On Sunday, the bulls managed to pull the price of BTC back into a resistance zone formed between the 38.2% (19,109) and 61.8% (19,267) daily Fibonacci Retracement levels measured from Oct. 10 - 11.

Notably, BTC had been trading within a range set between the opening (19,440) and close (19,061) of Oct. 10 - 11 for the past week.

In the coming days, it’ll be crucial for the bulls to close a daily candle above the 61.8% and then towards the next resistance zone (19,380 - 19,523) to establish a “higher-high” wave on a daily timeframe.

BTC Daily Resistance zones

1. 19,380 - 19,523
2. 19,619 - 19,700
3. 19,729 - 19,792

BTC Daily Support zones

1. 18,939 - 18,851
2. 18,715 - 18,580
3. 18,551 - 18,472

🔵 ETH Weekly Timeframe

As of Oct. 17, Ether (ETH) was trading below the 61.8% (1346) weekly Fibonacci retracement level measured from Jul. 4 - Aug. 8 and the monthly support level of 1,313.

Notably, ETH made a strong return from a low of 1,192 last week which prevented a “lower-low” wave from forming on a weekly timeframe. This signifies the struggles bears have been experiencing to bring the price of ETH below the weekly trendline.

ETH Weekly Resistance zones

1. 1,345 - 1,379
2. 1,379 - 1,416
3. 1,427 - 1,458

ETH Weekly Support zones

1. 1,264 - 1,238
2. 1,241 - 1,192
3. 1,180 - 1,152

ETH Daily Timeframe

As of this writing on Oct. 17 00:54 UTC, ETH was trading at $1,302 (+1.69%) in a 24hr period.

Similar to BTC, ETH had been trading within range the past week, though notably, the bears managed to form a “lower-low” wave on Saturday by closing the daily candle below the last price of Oct. 11. However, the bulls swooped in and bought on the support zone (1,278 - 1,265) to bring ETH back into a resistance zone formed between the 38.2% (1,294) and 61.8% (1,310) Fibonacci Retracement levels measured from Oct. 10 - 11.

The Sunday candle had established a “higher-high” price action formation. To solidify its strength, in the coming days, the bulls will have to make the next “higher-high” wave by closing above the 61.8% (1,310) level and from there towards the next Fibonacci Extended resistance zone (1,326 - 1,332)

ETH Daily Resistance zones

1. 1,307 - 1,313
2. 1,318 - 1,322
3. 1,326 - 1,332
4. 1,334 - 1,342

ETH Daily Support zones

1. 1,301 - 1,294
2. 1,286 - 1,283
3. 1,278 - 1,265
4. 1,253 - 1,248

📌 The topic of the Day: Apple and the Metaverse

Tech giants in the U.S. are betting that the next big thing will be the Metaverse, particularly Meta which changed its name last year and recently released a VR headset for its flagship Metaverse, Horizon Worlds.

Meta even announced a partnership with Microsoft, which acquired Call of Duty and Warcraft publisher Activision Blizzard for $68.7 billion early this year.

For Apple, which is known for its secretive agenda, will begin with a high-end mixed reality headset that offers both virtual reality (VR) and AR functionality, according to Bloomberg’s findings.

Apple’s VR headset dubbed the “Reality One” or “Reality Pro”, is expected sometime in 2023. According to Apple analyst Ming-Chi Kuo, the mixed reality headset will sell for upwards of $3,000, which is double the price in relative to Meta’s Quest Pro headset.

A “RealityOS” operating system along with experiential versions of apps like Maps and FaceTime, as well as avenues to consume media and games and collaborate with other wearers are also in development.

Traditions of Apple dictate that everything needs to be perfect and original, so no doubt Apple will rename the Metaverse as well. What would Steve name this new horizon?

🗒 Happenings of The Week (Oct. 14 - 16):

• 📣 CFTC Commissioner Christy Goldsmith Romero proposed to split the definition of retail crypto investors into two parts to applying different rules to households and entities with high net worth. The current definition of a retail customer is an individual with total assets that do not exceed $10 million which range from people who make less than $50,000 in the markets to hedge funds that make millions. Last Friday, SEC Chair Gary Gensler reiterated his support for the CFTC to oversee the crypto spot markets.

• 📣 UK’s Financial Conduct Authority (FCA) has appointed former fintech specialist Binu Paul as its head of digital assets. The cumbersome and lengthy licensing process for crypto previously caused some companies to give up on the prospect and seek approval in other jurisdictions.

• 📣 Bank of Canada study shows expansion in Bitcoin ownership from 5% in 2020 to 13% in 2021. Researchers found that buyers predominately accessed digital currencies via exchanges on mobile and that 66% of respondents who did not own any Bitcoin also showed a basic understanding of the blockchain network.

• 📣 France’s third biggest bank Société Générale gets approval to custody, sell and trade digital assets due to a digital asset service provider (DASP) ruling from the French financial market regulator Autorité des Marchés Financiers (AMF). This latest ruling implies that French VC firms will now have legal means to custody their token investments.

• 📣 According to Bloomberg, law firm Roche Freedman had been removed from a class action against stablecoin issuer Tether and crypto exchange Bitfinex following the leaked videos released on the whistleblower website CryptoLeaks. The class action against Bitfinex and Tether alleged over $1.4 trillion in damages suffered by plaintiffs.

• 📣 Meta, which released its Quest VR headsets last week, faces hurdles to growing its user base in Horizon Worlds, its flagship Metaverse. The company has revised its goal of reaching 500,000 monthly active users by year-end to 280,000. Horizon Worlds’ current number of active users stands below 200,000 according to the Wall Street Journal.

• 📣 Solana’s biggest NFT marketplace Magic Eden opts for optional royalty payments. Buyers will now have three ways to set their preferred royalty percentages. The move follows DeGods, a popular NFT collection on Solana, which removed all royalty payments last week.

• 📣 Beer giant Budweiser released an NFT collection that features live scoreboards for the upcoming FIFA World Cup in Qatar. The Budverse x FIFAWorldCup Live Scoreboard NFT Collection allows buyers to mint a scoreboard that will track their country of choice throughout the World Cup that begins on Nov. 20.

• 📣 Metaverse content developer Everyrealm which raised $60 million in Series A funding led by a16z back in March gets support from influencer Paris Hilton. Its new game Hometopia is a free-to-play game set to launch this year on Epic Games Store.

• 📣 Flashbots has announced an upgrade called SUAVE to resolve censorship concerns. Flashbots is a service that provides suggested blocks for validators to process while maximizing reward payouts. SUAVE will address censorship resistance and decentralization concerns stemming from the transactions related to Tornado Cash.

• 📣 This week’s fundraising activities include but are not limited to:

  • 🔹 Investment app startup Stash, which previously closed a Series G fundraise with a $125 million capital infusion in February last year led by Eldridge, raised another $52.6 million via debt offering. The platform now supports purchases of eight cryptocurrencies.

• 📣 This week’s onchain criminal activities include but are not limited to:

  • 🔹 Mango Markets exploiter revealed his identity on Saturday as Avraham Eisenberg. The Mango community voted to allow Eisenberg to keep $47 million while returning the remaining $67 million to the project. The hack was the sixth-largest DeFi exploit in history, falling just behind Cream Finance’s $130 million hack.
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  • 🔹 Crypto market maker Wintermute paid off its $96 million loan on DeFi lender platform TrueFi. In September, it suffered an exploit due to vulnerability associated with a ‘vanity address’ used to reduce gas costs and lost $160 million. CEO Evgeny Gaevoy said Wintermute’s liquidity remains strong.
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  • 🔹 Staking protocol TempleDAO, which saw an exploit of $2.3 million last week, saw its hacker move funds via Tornado Cash Sunday over 24 transactions according to Etherscan.