This week, our desk noticed that BTC market volatility started to pick up, with multiple key data releases on the US labour market and CPI before next week’s FOMC meeting. BTC price was closely tracking the US equities performance, while some altcoins had a more independent journey.
Sui ($SUI) is a unique Layer 1 blockchain and smart contract platform that seeks to enhance digital asset ownership by making it fast, private, and accessible to everyone. The recently launched Grayscale Sui Trust, by the digital asset manager Grayscale, is available to accredited investors for SUI exposure. The bullish news helped SUI achieve a 15.3% gain in one week while BTC had a 0.8% loss during the same time.
Book of Meme ($BOME) also saw strong trade demand on Convert last week. This meme coin saw a 73.4% volume increase on Convert and a 4.1% gain last week, outperforming many other meme coins with similar market capitalization.
The layer-1 blockchain Cardano ($ADA) was introduced in 2017 by Charles Hoskinson, a co-founder of Ethereum. Its eagerly awaited "Chang" update was released on September 1st, completing the ecosystem's long-term shift to decentralized governance. Holders of ADA tokens will be able to influence Cardano's future by choosing governance representatives and approving development ideas thanks to this hard fork update. Last week, ADA had a 7.2% gain due to the bullish sentiment after the upgrade.
Overall Market
The above chart shows the BTC price movement in the 8-hour chart.
The BTC price has been trading in this blue downward trend for nearly six months, and it has experienced a significant correction, with a 34% drop from the all-time high of $73,777 to $49,000, a market low caused by the carry trade unwind on August 5.
As previously discussed, the $50k/$52k range served as a strong support zone, with the $57k level providing local support. BTC prices tested this again in the $50k/52k range last Friday following the disappointing nonfarm payroll data in the United States, raising market concerns about the US economy and the need for a 50 basis point rate cut by the Fed on September 18. Historically, when the Fed lowers interest rates in poor economic conditions, it usually results in a recession within 12 to 18 months.
And we expressed concern that the Fed's 50 basis point rate cut would trigger another round of risk asset sell-offs, pushing the BTC price below the strong support range of 50k/52k. If that scenario unfolds, the current bull cycle will effectively end and become the shortest in BTC history, aside from the 2013 cycle.
This week's CPI data suggests that inflation in the United States is moving in the Fed's favour, and the market is now leaning toward a 25 basis point rate cut by the Fed on September 18. The reduced concern about a potential recession in the United States encourages risk-taking. Following the initial reaction to the CPI data, US stocks rallied and recovered all of their losses, closing higher. BTC tracked US equities closely, falling below $55.7k before rising above $57k before the session ended.
The FOMC meeting will take place next week, and our desk anticipates some market volatility around the time when Fed Chair Powell delivers his speech after the meeting.
Options Market
The above chart is the 25-delta skewness on BTC options in the last two weeks.
A 25-delta skew on options refers to the premium difference between a 25-delta call and a 25-delta put with the same expiry. The negative skew indicates that options traders would prefer to pay a higher premium on puts for downside protection than on calls for upside rewards. It provides a proxy measure for market sentiments by tracking the 25-delta skew across different expirations.
As shown in the chart above, front-end BTC options (with a 7-day expiry) have been negative for the last two weeks, with the negative skew further lowering last Friday when BTC was sold below $52.7k. The chart also showed that market sentiment shifted to neutral over the weekend as the Bitcoin price recovered.
The skew in medium- to long-term options suggested that options traders were not as bearish as indicated by the front-end options. In the last two weeks, the 60-day, 90-day, and 180-day expired options have all had above-zero skews, while the longer-dated options have maintained steady skews above 0. With the risk backdrop of reduced concern on the US recession and a Fed rate cut on the horizon, risk appetite is encouraged. We anticipate that the skew on BTC options across all durations will rise, indicating some bullish sentiment before/after the FOMC meeting.
Macro at a glance
Last Thursday (24-09-05)
According to ADP nonfarm employment data, the US private market added only 99k new jobs in August, far below analysts' expectations of 144k. The weak ADP data raised market concerns about the US economy's conditions, increasing the likelihood of a 50 basis point rate cut by the Fed in September.
Last week, the number of initial jobless claims in the United States was 227k, which was lower than the estimated 231k.
The S&P Global Services PMI was 55.7 in August, up from the forecasted 55.2.
Last Friday (24-09-06)
In the United States, nonfarm payrolls (NFP) increased by 142,000 in August, less than 160,000 market expectations. This followed an increase of 89,000 in July, revised from 114,000. The USD index traded volatilely in the Friday session, while US equities fell as concerns about the US economy outweighed risk appetite.
The US unemployment rate fell back to 4.2% in August, after hitting 4.3% in July.
The unemployment rate in Canada increased to 6.6% in August, exceeding the forecasted 6.5% and July's 6.4%.
BTC price experienced a significant sell-off in the Friday US session and found support at 52.5k following an 8% drop.
On Monday (24-09-09)
The unemployment rate in the UK fell to 4.1% in July from 4.2% in June, meeting economists' expectations.
The German CPI fell by 0.1% monthly in August, compared to a 0.3% increase in July. The annualized CPI change was 1.9%, which is lower than the 2.3% increase in July.
On Wednesday (24-09-11)
The US CPI increased by 0.2% month on month in August, matching the pace seen in July. August saw annualized CPI growth of 2.5%, down from 2.9% in July. However, the monthly core CPI growth rate reaches 0.3%, exceeding the estimated 0.2% and July's 0.2%. The stubborn shelter cost served as the primary driver of the unexpectedly higher core CPI growth.
The CPI data released on Wednesday solidified the Federal Reserve's decision to cut interest rates by 25 basis points next week, with an 86% probability. US equities initially lost some ground after the CPI data was released. The market then turned bullish as the Fed's chances of cutting interest rates by 25 basis points increased, and risk assets were bid up. The S&P 500 index finished up 1.07%, while the Nasdaq index rose 2.15%. As a first reaction, the BTC price fell below $55.7k before regaining the $57,000 level by market close.
Convert Portal Volume Change
The above table shows the volume change on our Convert Portal by zone.
Market volatility began to rise in early September, and the BTC price closely tracked US equities. Last Friday after the weak job data in the US, the BTC price fell below $52.7k amid rising concerns about the US economy. The sentiment improved over the weekend, and BTC returned to above $57k on Wednesday.
Last week, the Megadrop Zone saw a volume increase of 59.8%. The primary reason for the volume increase was the high demand for BounceBit ($BB).
The volume of the Storage zone increased by 14.0% during the same time period. The BitTorrent ($BTTC) demand surge was the primary driver of the volume increase in the Storage zone.
In addition, the NFT Zone's volume increased by 4.3%. The change was primarily driven by Mines of Dalarnia ($DAR).
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