Market Stability Meets Crypto Anticipation: ETF Decision Looms Amidst Low Volatility
Aug 4, 2023 - 5 min read
What happened last week
This week brought an intriguing mix of stability and anticipation in the markets. Crypto, led by BTC and ETH, remained within range-bound zones, and the spotlight is now shifting to the first Spot BTC ETF decision on August 13th. The crypto market is seemingly in a holding pattern, with low volatility being a persistent theme.
On the traditional front, the U.S. stock market concluded a positive week, buoyed by strong earnings reports and reassuring central bank messages. Earnings season continues again next week. Meanwhile, Curve Finance's exploit rattled the DeFi space, causing a sharp decline in the CRV token.
On Monday it came forward that the SEC had ordered Coinbase to delist all tokens except for BTC certainly not kicking the week of on a good note. The impact was however limited as this was merely the reason why Coinbase decided to go to court against the SEC. Shutdown your business now without getting tried or go to court and at least have a chance.
The Binance FUD also continued this week with some rumors circulating about US regulators being worried for another FTX-like run if they go ahead with fraud charges. In Nigeria the SEC once again ordered Binance to cease operations. In another part of the world, Dubai, a Binance subsidiary became the first exchange in the world to secure an Operational MVP License from Dubai's Virtual Assets Regulatory Authority (VARA). Binance is also opening a Japanese subsidiary this month.
BTC and ETH witnessed 180-day volatility plunging to multi-year lows of 46% and 49%, respectively. BTC's gains have been hard-fought this year, and the entire market appears to be following a similar sluggish pattern. Unusually, Bitcoin's five-day volatility even dropped below that of the S&P, Nasdaq and gold, a rare occurrence that has historically led to a volatility eruption.
Next week seems light on macro news relatively speaking. Key events to watch include the trade balance on Tuesday, and CPI data on Thursday and Friday. This week's flat trading, coupled with low volatility, leaves us wondering if we're in the calm before the storm.
While we eagerly wait for the spot ETF decision on August 13th, a senior ETF analyst at Bloomberg, Eric Balchunas, wrote on Twitter that six companies are currently applying for Ethereum futures ETFs.
Our take
The current market environment, is characterized by range-bound trading and multi-year lows in volatility as others have also noted, due to a muted macro environment and a lack of catalysts. With the spot BTC ETF decision on the horizon, and key economic indicators due next week.
In our view it is highly likely that we will soon see a volatility eruption, akin to previous instances when Bitcoin's volatility dipped below major indices. While the crypto landscape appears to be in a sluggish phase, it's wise to keep an eye on potential catalysts that could stir the markets.