What happened last week

This week was certainly eventful, a lot more than expected with the Kraken and Binance charges which we went over in the Wednesday market update, so I refer to that. Friday morning the crypto board seems to be in a state of recovery, one would even be inclined to say cluelessness given Kraken and Binance. Perpetual futures liquidations have tended to increase over the past few months with the current week matching the expectations as we saw some $230 million in liquidations on Wednesday, mostly longs obviously, followed by another $100 million on Thursday as the market reclaimed its losses, this time mostly in shorts. 

Options expiry is generally taking place on Fridays at 09:00 CET, and today is no different besides the notional value being $6.5 billion dollars which obviously on the higher end of the spectrum but we saw a bigger expiry back in March. Usually, the thesis is that the further we move to the expiry, the closer we move to the max pain price which for Bitcoin would be 33’000. That certainly did not hold true this time, which can safely be considered bullish not only because the price didn’t gravitate towards 33k but also because with a put/call ratio 0.83 its already clear that options traders were bullish and lets not forget ETFs. 

Equities in Europe outperformed in the morning after the release of the ECB minutes on Thursday which were reminiscent of those of the Fed. That means no cuts, no hikes but rather higher for longer. Europe is up on hawkish comments as the minutes also incited confidence that inflation is being tamed appropriately. Another factor that could have had an impact on the short-term Europe outlook given the signs of energy being a major challenge to bring down inflation, would be the OPEC meeting which is said by some to have been delayed by a strife over further production cuts which especially UAE is reluctant to do as they are already producing well below capacity. Oil saw a noticeably volatile trading range of 5% over the past 24 hours, while having reclaimed some losses, Brent Crude is $1 down since yesterday.

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Our take

The prevailing bullish sentiment is not to be overlooked although it was challenged the past and current week with the 2 ETF decisions that were due last week having been postponed, this seems to have been expected. This was the first deadline of the 2 and all other ETFs have been delayed as much as possible. The news of Kraken and Binance have also not been interpreted as overly negative, as the charges against Binance will be dropped as part of the settlement and with the ETF approvals looming, a more institutionalized environment which has long been needed continues to develop given the oversight they will now be under. An analyst from JPMorgan also pointed out that the increased oversight decreases the risk of an exchange collapse as well. Not only these actions are reinforcing a shift but also the options market which has overtaken the futures markets in terms of notional value which with the 0.83 ratio mentioned earlier also indicates bullish sentiment.

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The week ahead

Monday, 27 November 2023

• US & EU Bond Auctions
• China Industrial Profits

Tuesday, 28 November 2023

• Europe Money Supply
• ECB Lane Speech

Wednesday, 29 November 2023

• ECB Non-Monetary Policy Meeting
• Europe Consumer Sentiment + Inflation
• US GDP
• US Trade Balance
• Russia Corporate Profits, Business Confidence, Production, Real Wage Growth, GDP

Thursday, 30 November 2023

• NBS Manufacuting PMI
• Europe Inflation Rate
• US Personal Income, Jobless Claims
• Fed Speeches

Friday, 01 December 2023

• Caixin Manufacturing PMI
• US Manufacturing PMI