🌳 Former Fed Chair Ben Bernanke Calls For A Different Approach To Macroeconomic Forecasts; Bitcoin Halving Sees Record Fees As Runes Debut

22 Apr 2024, Monday

2:42 AM

🌳 Former Fed Chair Ben Bernanke Calls For A Different Approach To Macroeconomic Forecasts; Bitcoin Halving Sees Record Fees As Runes Debut

BTC

ETH

S&P Futures 500

$64,922.86

$3,151.95

$5,012.75

(+3.55%)

 (+3.61%)

(-0.22%)

Note: All percentages shown above are referenced to the previous business work day's 09:00 (GMT+8)


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What We Are Covering Today

  • Former Fed Chair Ben Bernanke calls for scenario analysis in macroeconomic forecasts; ECB largely agrees on the first interest rate cut in June (More in Macro & TradFi)
  • Bitcoin network fees decline after a significant surge from halving event; Bitwise CEO suggests an increase in Bitcoin exchange-traded fund (ETF) holdings by wealth management firms (More in DeFi & CeFi)
  • ETH whale withdrew 10,119 ETH worth $31.85M from Binance; ETH fees were reduced significantly (More in On-Chain)
  • IVs converged back towards the neutral zone; Contango shape for Term Structures is back following the previous backwardation (More in Crypto Derivatives (More in Crypto Derivatives)
  • BTC tests $65K resistance; ETH's rebound falls short, facing $3.3K hurdle (More in Crypto Technical Analysis)

Macro & TradFi

The Federal Reserve's traditional approach to forecasting and communication is facing criticism as the economy continues to present surprises, particularly in the wake of the pandemic. Rather than focusing solely on central projections, which are often inaccurate and fail to encompass the range of potential outcomes in a volatile economy, there's a growing call for scenario analysis. This approach, championed by figures like former Fed Chair Ben Bernanke, involves considering a spectrum of credible risks and how the central bank might respond. By publishing both central and alternative scenarios, the Fed could provide more insight into its reaction function and help the public anticipate future policy actions. This shift comes amid a backdrop of economic uncertainty, with recent inflation figures challenging previous rate-cut projections. While the Fed has historically favored a single policy path, there's increasing recognition of the value of discussing alternative scenarios to acknowledge the inherent uncertainties in economic forecasting. Some Fed officials, such as Cleveland Fed President Loretta Mester, have expressed support for scenario analysis, suggesting a potential shift in communication practices in the future.

Meanwhile, European Central Bank officials largely agree on the likelihood of a first interest rate cut occurring in June but diverge on subsequent rate paths and how external factors like Federal Reserve actions and geopolitical risks might influence ECB policy. While some advocate for a cautious approach to further rate cuts, emphasizing data dependency, others suggest more aggressive action. The prospect of delayed rate reductions by the Fed complicates ECB discussions, along with concerns about potential oil price shocks and exchange rate fluctuations. ECB President Christine Lagarde underscores the bank's commitment to price stability amid these challenges.

Lastly, a sharp decline in tech stocks dragged down the S&P 500 and Nasdaq Composite for the sixth consecutive day on Friday, while gains in financials and consumer staples lifted the Dow Jones Industrial Average. The Dow rose 0.6% on Friday to close the week flat, while the S&P 500 slid 0.9%, marking its largest weekly decline over a year, and the Nasdaq Composite tumbled 2.1%, ending the week down 5.5%, its worst performance since November 2022. Super Micro Computer (SMCI) saw a significant drop in its stock price after choosing not to preannounce its first-quarter earnings, fueling concerns about potential disappointments. Netflix (NFLX) reported a surge in new subscribers but missed analyst estimates with its current-quarter revenue guidance, leading to a decline in its shares. Meanwhile, Bitcoin rose above $64K ahead of the first Bitcoin halving in four years. In individual stock movements, American Express (AXP) surged 6.2% after reporting better-than-expected earnings, while Nvidia (NVDA) led a semiconductor sell-off, falling 10%, and Meta (META) slipped 4.1% amid the broader tech sell-off.

CeFi & DeFi

  • Bitcoin network fees decline after a significant surge from halving event
  • Bitwise CEO suggests an increase in Bitcoin exchange-traded fund (ETF) holdings by wealth management firms
  • BlackRock Bitcoin ETF hits 69 days of inflows on '4/20' halving day
  • Binance tax evasion trial moved to May 17 in Nigeria
  • Crypto users propose dropping the lawsuit against Sam Bankman-Fried to pursue FTX influencers

Following a record daily average transaction fee of $128 on the day of the halving event, Bitcoin network fees have experienced a significant decline. As of April 21st, data from mempool.space indicates that the average cost for medium-priority Bitcoin transactions has fallen to a range between $8 and $10. One day before on the 20th, a staggering 37.7 Bitcoin worth $2.4M was paid to Bitcoin miners in the Bitcoin halving block at block height 840,000 — making it the most sought-after piece of digital real estate in the network’s 15-year history. A significant portion of the transaction activity observed at block 840,000 stemmed from heightened interest among memecoin and non-fungible token (NFT) enthusiasts. This interest was fueled by the opportunity to inscribe and etch rare satoshis using the Runes protocol, a novel token standard that debuted at the block coinciding with the Bitcoin halving event. 

Meanwhile, Bitwise CEO has issued a forecast suggesting an increase in Bitcoin exchange-traded fund (ETF) holdings by wealth management firms. This prediction coincides with growing anticipation for heightened traction within the Bitcoin ETF market following the recent halving event, where a positive inflow occurred immediately preceding the Bitcoin halving event, following a five-day period characterized by net outflows. BlackRock's iShares Bitcoin Trust (IBIT) has exhibited significant growth, narrowing the lead held by Grayscale's Bitcoin trust by approximately $2B. This development positions BlackRock as a potential contender for the title of the world's largest Bitcoin fund. The growing adoption of Bitcoin ETFs by institutional investors represents a stealthy but significant approach for the Digital Asset industry.

On-Chain

On-chain data from Lookonchain revealed that a whale withdrew 10,119 ETH, worth $31.85M, from Binance. Cumulatively, he has purchased 127,388 ETH worth a total of $405.19M from Binance and various decentralized exchanges since April 8, with an average purchase price of $3,172. Despite its lackluster performance in the last few days, whales' interest in ETH continues strong.

On the other hand, an analysis by Santiment shows that Ethereum network fees have reduced significantly as compared to March 4th when demand on the network peaked—declining from $15.21 to a current average network cost of $2.07. This reduction in gas fees could represent the after-effects of the Dencun upgrade on reduced network costs, or it could also represent the growing disinterest in Ethereum by traders, leading to decreasing activity and hence lower gas fees.

Crypto Derivatives

  • Funding rates remain positive for both BTC and ETH.
  • Deribit Implied Volatility Index (DVOL) for BTC and ETH remain flat at 71.44% and 73.99%, respectively.
  • The 30-day 25-delta skew (C-P) for BTC dropped to -0.22%, while ETH recovered to -2.39% in the negatives.
  • The futures market witnessed $100.47M in liquidations, with longs representing 58.3%.

Top 3 USDT Perpetual Funding Rate Arbitrage Opportunities

Net Annualized APR

Perp (USDT pair)

Long on

Short On

27.33%

AVAX

OKX

dYdX

22.06%

AVAX

Binance

dYdX

15.46%

ADA

OKX

Bybit

Notes:

1) Pairs observed include BTC, ETH, SOL, BNB, XRP, LTC, and DOGE vs. USDT perps. 

2) CEXs observed include Binance, Bybit, OKX & dYdX.

3) Lookback period is 24 hours.


Today's BTC implied volatility chart, captured after the recent halving event, presents a market in recalibration mode. The noticeable easing of short-term IV indicates that the anticipatory volatility pre-halving has subsided, with traders now less inclined to expect immediate large price swings. This period of post-halving adjustment is further emphasized by the longer maturities' IV trending downwards, suggesting that the market has begun to factor in the reduced inflation rate of BTC and is moving toward a consensus on its longer-term valuation in a more settled trading environment.

Today’s term structure has recovered its contango shape following last week’s backwardation. The contango formation indicates that while the market has absorbed the immediate impact of the halving, traders are possibly anticipating longer-term factors—such as potential regulatory changes, macroeconomic trends, or future network developments—that could influence Bitcoin's price. The market appears to be positioning for uncertainty in the longer term, as reflected in the premium priced into forward contracts.

The BTC 25-delta skew indicates a swing towards positive sentiment, with the 7-day skew recovering to -1.82% and the 30-day improving to -3.14%, amid growing investor interest ahead of the Bitcoin halving and increased geopolitical tensions between Iran and the USA. This trend suggests traders are pricing in potential upside risks associated with the halving event and seeking a hedge amid international uncertainty.

@Paradigm trading activity included the buying of 325x 26-Apr-24 $58K Puts, a 300x 26-Apr-24 $65K/10-May-24 $70K Call Calendar, and 200x 26-Apr-24 $64K Calls, while 200x 26-Apr-24 $64K Calls were sold, and a 200x 31-May-24 $57K Put was bought. ETH options were not far behind, with trades involving the selling of 1750x 26-Apr-24 $3K Puts, buying of a 1250x 26-Apr-24 $3.8K/28-Jun-24 $3.2K Put Calendar, and the selling of 1000x 31-May-24 $2.7K Puts.

Crypto Technical Analysis

Moving on to TA, BTC’s price demonstrates a recovery to the $65K level following an underwhelming performance over the weekend. Currently, BTC’s price action tests the $65K resistance level, a critical junction where previous attempts have seen reversals. A successful breach above this level could pave the way to the next resistance at $71K, marking a potential increase of approximately 8.8% from the current price. On the flip side, should the resistance hold, we may see BTC retreat to seek support. The nearest significant support level is at $60K, a descent of around 7.7% from its current price. The fate of this tentative recovery hinges on BTC's ability to sustain above or break through the $65K resistance.

Meanwhile, on the 4-hour chart, ETH also exhibits a recovery phase, yet it remains distinct from Bitcoin's trajectory. ETH's price is currently short of challenging the key resistance level at $3.3K. If surpassed, this resistance could signal a substantial bullish shift, potentially leading to further upside resistance near the $3.6K mark, representing an approximate 7.7% increase from current levels. Conversely, should the price reverse, the immediate support to watch is at the $3K threshold, suggesting a potential decline of about 4.7%. It’s essential to monitor how ETH interacts with the current price zone as it could determine the market's short-term direction. The differentiation in recovery patterns between BTC and ETH highlights the individual asset behaviors traders often need to consider.

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