Nervos ($CKB) emerged as one of the top-performing tokens last week, achieving a remarkable 103% increase in price. The Nervos Network operates as a proof-of-work layer-2 solution designed to enhance Bitcoin's capabilities by adding programmability and scalability, utilising the RGB++ protocol for its implementation.
Sui ($SUI), a layer 1 blockchain and smart contract platform, demonstrated consistent trading interest last week. After it experienced a doubling of trading volume on Convert and a 15% price increase last week, it continued its upward trajectory with an additional 41.2% gain in price and a 56.2% rise in volume on Convert this week. This robust demand has propelled $SUI into the top 30 by market capitalization.
Fantom ($FTM), now known as Sonic Labs, is preparing for its most significant upgrade with the launch of the Sonic testnet on September 6. This upgrade will introduce a new high-throughput layer-1 blockchain, complete with a native layer-2 bridge to Ethereum ($ETH). Investors showed strong confidence in this upgrade, and the price soared 34.9% last week.
Overall Market
The above chart shows the BTC price movement in the 1-day chart.
The BTC price has been navigating within a blue downward trend for almost six months, managing to remain within the channel rather than experiencing a deeper decline. As previously noted, the $50k/$52k range has acted as a robust support zone, while the $57k level has provided local support. Following a retracement from the $60k mark, the BTC price tested the $57k support before rebounding last weekend.
In light of the unexpected 50 basis point rate cut by the Federal Reserve, risk appetite has returned to the cryptocurrency market, with BTC currently trading around the $62k level. The recent breakout from the downward trendline has enhanced BTC's momentum and improved sentiment in the higher time frames. The red trendline now functions as support, allowing BTC to continue its upward trajectory and challenge resistance levels above, including $63k and $65k. If BTC successfully breaches these two resistance points, a significant resistance level at $68k awaits, situated near the upper boundary of the blue channel.
While the 50 basis point rate cut by the Fed indicates a potential improvement in global liquidity, it may also reflect the Federal Reserve's concerns regarding the US economy. Many market participants draw parallels between this rate cut and the one implemented by the Fed in 2007, which ultimately contributed to the Great Financial Crisis 2008. It is widely acknowledged that the Fed possesses more comprehensive insights into the US economy than most investors. The decision to cut rates by 50 basis points rather than the anticipated 25 basis points, signals a shift in tone from the Fed's statements made in July. This has led to investor apprehension regarding a possible impending recession.
Our analysis interprets this 50 basis point rate cut as a form of insurance for the Fed, aimed at mitigating potential regret should market conditions deteriorate. If the current market conditions stabilise or improve, particularly in the US labour market, the Fed will have greater flexibility in its future interest rate decisions.
Options Market
The above chart is the implied volatility on BTC options in the last three weeks.
The chart indicated a notable increase in implied volatility (IV) for front-end options over the past few days, aligning with our previous discussion regarding anticipated high market volatility surrounding the FOMC meeting. Following Fed Chair Powell's press conference, the front-end IV experienced a significant decline, with the IV of 7-day options dropping from 56% to 47%.
As the IV for front-end options (with 7-day and 30-day expirations) fell below the 50% threshold, it created an opportunity for implementing a straddle or strangle options strategy. For options traders without a directional bias who aim to capitalise on fluctuations in IV, constructing a straddle or strangle could be advantageous.
A strangle, for instance, is a strategy that combines purchasing (or selling) both an out-of-the-money call and put option on the same underlying asset with the same expiration date.
If a trader anticipates high volatility but is uncertain about the direction of price movement, a long strangle would be a suitable choice. This strategy is profitable when the underlying asset experiences significant movement in either direction by expiration, making it appealing for those expecting volatility.
Conversely, if a trader expects limited price fluctuations and low volatility, a short strangle may be a viable option. In this case, the trader would collect premiums on both sides if the asset's price remains within the two strike prices on expiry.
Macro at a glance
Last Thursday (24-09-12)
The European Central Bank implemented a 25 basis point reduction in interest rates, aligning with market expectations. This decision after the September meeting represents the second decrease in the deposit rate for the year. Additionally, the ECB revised its growth forecast for 2024 down to 0.8%, a slight adjustment from the previous estimate of 0.9%.
In the United States, initial jobless claims increased from 228,000 last week to 230,000 this week, surpassing the anticipated figure of 227,000.
The Producer Price Index (PPI) in the US experienced a monthly increase of 0.2% in August, exceeding the forecasted growth of 0.1% and July's unchanged figure of 0.0%. The Core PPI also rose by 0.3% month-over-month, outpacing the expected 0.2% increase and July's decline of 0.2%. The rise in PPI was attributed to increased service costs, although the overall trend continues to reflect easing inflationary pressures.
On Tuesday (24-09-17)
In August, US retail sales experienced a modest increase of 0.1% on a monthly basis, surpassing the anticipated decline of 0.2%. However, core retail sales only managed a 0.1% rise during the same timeframe, falling short of the expected 0.2% and July's more robust growth of 0.4%.
In Canada, the Consumer Price Index (CPI) recorded a year-over-year increase of 2.0% in August, a decrease from July's 2.5% rise. On a monthly scale, the core CPI saw a slight uptick of 0.1%, while the overall CPI experienced a contraction of 0.2%. Furthermore, the Bank of Canada's Core CPI reported a 1.5% annual increase, down from the 1.7% growth noted in July. This year, the Bank of Canada has implemented three interest rate cuts, reducing the rate from 5.0% to 4.25% as of September 4.
On Wednesday (24-09-18)
During its September meeting, the Federal Reserve implemented a 50 basis point reduction in interest rates, adjusting the target range to between 4.75% and 5.00%. The updated dot plot indicates the possibility of another 50 basis point cut by the end of 2024, along with a further 1% decrease in 2025. Although the unexpected rate cut initially propelled risk assets, leading to an all-time high for the S&P 500 at 5,689 and Bitcoin surpassing $61,000, market dynamics shifted following Fed Chair Powell's remarks, which emphasised a focus on the labour market and suggested a higher neutral rate than pre-pandemic levels. Consequently, the US stock market closed lower, with the S&P 500 and Nasdaq indices declining by 0.29% and 0.31%, respectively.
In August, the United Kingdom experienced a 0.3% rise in its inflation rate, as indicated by the Consumer Price Index (CPI), marking a recovery from a 0.2% decrease observed in July. The annual CPI change remained steady at 2.2%, consistent with the figure reported in July. This stability in the annual rate suggests a cautious economic environment as the UK navigates its inflationary pressures.
The Eurozone recorded a modest monthly inflation increase of 0.1% in August, with an annual growth rate of 2.2%, which is a decline from July's 2.6% increase. Additionally, the core CPI showed a slight deceleration, falling to 2.8% in August from 2.9% in the previous month. These figures indicate a cooling trend in inflation within the Eurozone, prompting discussions about potential monetary policy adjustments.
Convert Portal Volume Change
The above table shows the volume change on our Convert Portal by zone.
Market activity experienced an uptick last week, with Bitcoin (BTC) trading above the $61,000 mark once again. The unexpected 50 basis point rate cut from the Federal Reserve has enhanced confidence and fostered a bullish outlook within the cryptocurrency market. We anticipate an increase in trading volumes in the upcoming weeks as global liquidity continues to improve.
In the AI Zone, there was an 8.7% rise in trading volume, largely attributed to the heightened interest in Worldcoin ($WLD).
Meanwhile, the Launchpool zone saw a 4.4% increase in volume, driven primarily by a surge in demand for Sui ($SUI).
Additionally, the BNB Chain Zone recorded a 2.5% volume increase, mainly fueled by robust demand for BNB ($BNB) alongside the introduction of the new project $CATI on Launchpool.
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