Following a 50 basis point interest rate reduction by the Federal Reserve last Wednesday, market sentiment shifted to a bullish outlook, as discussed in our previous update. Last week, Bitcoin (BTC) traded in the vicinity of $63,000, while our team noted a significant increase in demand for altcoins during this period. Notably, meme coins and certain layer-1 tokens, such as Sui ($SUI) and NEAR ($NEAR), garnered considerable attention.
Sui ($SUI) has notably outperformed in the top 100 cryptocurrencies by market capitalization. The price of SUI began its upward trajectory on September 2 at $0.74, reaching a peak of $1.76 on September 24, marking an impressive 137% increase over three weeks. A key factor contributing to this remarkable surge was the recent availability of the Grayscale Sui Trust to accredited investors.
Similarly, Bittensor ($TAO) experienced a substantial 66.1% increase over the past week, with trading volume on Convert soaring by over 200%. When the Grayscale Sui Trust was introduced back in August, Grayscale Investment also introduced the Grayscale Bittensor Trust, which focuses on investing in Bittensor ($TAO). The price of TAO began its ascent on September 6 at $228, climbing to a recent high of $590 on September 24, resulting in a 160% gain within three weeks.
Another layer-1 token, NEAR ($NEAR), has also seen robust demand in recent weeks, following the trend set by its competitor Sui. Grayscale Investment launched the Grayscale NEAR Trust a month prior to the Grayscale Sui Trust. While the simultaneous rallies of these three tokens may be coincidental, it is prudent to monitor their performance for potential patterns.
Overall Market
The above chart shows the BTC price movement in the 8-hour chart.
As highlighted in our previous update, the market sentiment has notably shifted towards a bullish outlook following the unexpected decision by the Federal Reserve to implement a 50 basis point rate cut last Wednesday. This move marks the beginning of a rate-cut cycle, which is generally perceived as a positive signal for global liquidity. Such an environment typically encourages investors to take on more risk, thereby fostering an overall increase in risk appetite across various asset classes.
In our analysis of Bitcoin (BTC), we identified critical resistance levels at $63,000 and $65,000 when the cryptocurrency was trading at approximately $61,000. These levels are clearly illustrated by the red bars in the accompanying chart. On the other hand, we have observed that the $50,000 to $52,000 range has established itself as a strong support zone, with $57,000 acting as a local support level, as represented by the green bars. Currently, the $63,000 level is functioning as a support for BTC, while the $65,000 level remains a significant point of resistance. Over the past week, the price of BTC has been fluctuating within this relatively narrow range, indicating a period of consolidation.
However, our team has observed a concerning decline in upward market momentum over the last 48 hours, which has been accompanied by a notable decrease in spot market volume. This trend suggests that demand for BTC may be diminishing, while the supply around the $65,000 mark remains substantial. Such dynamics could lead to increased selling pressure if the trend continues.
Looking ahead, if we were to witness a substantial upward candle in BTC price that successfully breaks through the $65,000 resistance level with significant trading volume, it would serve as a strong confirmation that bullish sentiment is indeed prevailing in the market. This breakout could potentially pave the way for a swift move towards our next target of $67,000. Should the price manage to overcome the $67,000 resistance, we anticipate a robust rally that would signal the conclusion of a six-month consolidation phase, setting the stage for further upward momentum in the cryptocurrency market.
While the current market conditions present both opportunities and challenges, the key levels we are monitoring will be crucial in determining the next steps for BTC and the broader market. Investors should remain vigilant and prepared to react to any significant price movements that may arise in the coming days.
Options Market
The above chart is the 25-delta skew on BTC options in the last two weeks.
The 25-delta skew serves as a valuable gauge for assessing market sentiment. By analyzing the differences in premiums between 25-delta calls and puts within the options market, this skew provides insights into the perspectives of market participants. A positive skew indicates that options traders are inclined to pay higher premiums for calls compared to puts, reflecting a preference for potential upside gains, whereas a negative skew suggests a greater inclination toward downside protection.
The above chart indicates that the skew in front-end options exhibited an upward trend towards zero after the BTC price found its support at the $57k level. The bullish 50 basis point rate cut by the Fed pushed the skew of the 7-day expired option above 0. However, the front-end skew has recently transitioned into a phase of sideways consolidation, remaining just below the zero threshold. In contrast, the skews for intermediate to long-term options that continue to be above the 0 mark have shown no significant directional changes.
This suggests that options traders are adopting a cautious stance regarding the short-term outlook for BTC prices while maintaining a more optimistic view for the long term. Following a drop in BTC prices below the $63,000 mark this morning, all skews experienced a decline, with the skew for the 7-day expired option falling below -2.
In conjunction with our analysis of the BTC spot price, our team anticipates that BTC will likely continue to trade sideways beneath the $65,000 resistance level ahead of the US PCE Price Index data release this Friday. The market may experience volatility in response to the PCE data as investors look to it for clues about the Federal Reserve's forthcoming decisions.
Macro at a glance
Last Thursday (24-09-19)
The Australian Employment Change for August was reported at 47.5K, a decrease from the revised figure of 48.9K in July, which was initially reported as 58.2K. This figure surpassed the consensus estimate of 25.0K. The unemployment rate remained stable at 4.2% for August.
During the Bank of England's meeting on September 19, the bank rate was held steady at 5%, aligning with economists' predictions. In August, the BoE had reduced the rate by 25 basis points following a drop in the annual inflation rate below 2% in July. Despite the Federal Reserve's recent 50 basis points cut, UK policymakers chose to maintain the current rates.
In the United States, initial jobless claims fell to 219,000 this week, down from 231,000 the previous week, indicating a slight improvement in the job market.
Last Friday (24-09-20)
The Bank of Japan decided to keep its interest rate at 0.25%. Governor Ueda indicated that the bank would take its time to assess the implications of global economic uncertainties, suggesting no immediate plans to increase borrowing costs.
The UK experienced robust retail sales growth in August, with a monthly increase of 1.0% and an annual growth rate of 2.5%, both exceeding forecasts of 0.3% and 1.4%, respectively. Core retail sales also demonstrated strong performance, with a monthly rise of 1.1% and an annual growth rate of 2.3%, significantly higher than the predicted 0.5% and 1.1%.
On Tuesday (24-09-24)
The Reserve Bank of Australia maintained its interest rate at 4.35%. Governor Michele Bullock emphasised that interest rate cuts were unlikely in the near future, while also softening the bank's previously hawkish stance by stating that monetary tightening was not under discussion.
In the United States, consumer sentiment declined in September, as reflected by the Conference Board's Consumer Confidence Index, which fell to 98.7 from 105.6 in August.
On Wednesday (24-09-25)
The new home sales in the US reached 716,000 in August, surpassing the forecast of 699,000, although this represented a decrease from July's figure of 751,000.
Convert Portal Volume Change
The above table shows the volume change on our Convert Portal by zone.
Following the 50 basis points reduction implemented by the Federal Reserve last Wednesday, our desk experienced a notable surge in trading volume across various sectors. While Bitcoin fluctuated between $62,000 and $65,000, there was a marked increase in interest from investors and traders in altcoins.
In the Monitoring Zone, trading volume surged by 156.3%, with ARK ($ARK) and Beta Finance ($BETA) being the primary contributors to this impressive growth.
Simultaneously, the Solana Zone recorded a 139.6% rise in volume following the price of Solana ($SOL) climbed above $150. There was a strong demand for meme coins within the Solana network, particularly for Book of MEME ($BOME) and Dogwifhat ($WIF).
Furthermore, the AI Zone has seen a strong trading volume increase for two consecutive weeks, primarily driven by strong interest in Bittensor ($TAO) and Worldcoin ($WLD).
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