Market Insights
Article by Elisha
BTC made new highs, touching 53,000 yesterday and ETH played catch up, climbing to a 3,033 high.
Funding rates in the Alts have been particularly elevated on this leg higher, paying up to 40% ann. in perpetual swaps. BTC and ETH forward curves were very elevated as well, yielding up to 17% at some points of the curve.
Anecdotally, this kind of speculative rotation to Alts is a mid-cycle phenomenon. Funding at these levels is typically difficult to sustain which means there could be a pullback in price after such a strong move higher. We have already started to see some selling pressure earlier in Asia afternoon (BTC 50,630 low, ETH 2,880 low).
A key event today that could trigger a wider correction is Nvidia earnings which will be released after the US close. As a major part of the S&P500 Index, Nvidia’s performance could set the tone for US equities in the near-term.
NVDA is currently trading at 90x P/E and Q4 earnings expectations have been adjusted higher recently. At these valuation multiples and high expectations on earnings, any disappointment could see a sell-off. That would certainly put a drag on US equities and crypto prices as well.
We have seen a tremendous amount of interest to sell the spot-forward spreads at these elevated levels. The amount of basis selling along with the heavy spot price today has dragged forward levels closer to 11-12% ann.
Even at these lower levels, the trade is still a risk-free 12%. Selling the end- Apr forward is particularly attractive given the high chance the forward points will collapse quickly post-halving.
Yesterday’s Fed meeting minutes revealed a less dovish tone, bringing the Fed’s implied victory over inflation under question. Combined with last Friday’s strong payroll data,
Chinese stocks continue to move lower today after yesterday’s disappointing press conference from state planners. The China A50 Index is down another 7% today and
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