What happened last week

Taking a glance at the markets, today's trading activity appears rather quiet following a recent market downturn – most coins have managed to recover a significant portion, if not all their losses. Interestingly, European equities stand out as the only region showing decisive gains at least in the morning leading up to the inflation figures released at 12:00 CET.

As mentioned yesterday, the recent minutes from the FOMC meeting confirmed a reluctance to cut rates in the near future due to persistent challenges in curbing inflation. It's noteworthy that Europe has traditionally closely followed the trends set by the United States in terms of inflation. The ECB has also been notably less vocal about potential rate cuts compared to the Federal Reserve the past year.

Inflation in the EU spiked substantially in December, reaching levels not seen since April of the previous year. Traders will likely remain on the lookout for any hints regarding rate cuts throughout the year, echoing sentiments from the Fed.

Turning to volatility, the at-the-money implied volatility for Bitcoin (BTC) has experienced a significant surge, currently standing at around 70%. In simple terms, this metric reflects the distance between the strike prices of open options and the current spot prices. A rising volatility suggests indecision or an anticipation of increased volatility, most likely linked to the upcoming ETF deadline in less than a week. Brace yourselves for potential volatility in the coming days. On the ETF topic, rumors have it that today might be the day of mass approval.

A noteworthy development in the crypto community revolves around Celsius, one of the largest ETH stakers, which declared bankruptcy as you know. Reports indicate that they are in the process of liquidating assets, including substantial amounts of ETH - reportedly selling around $20 million worth per week. With estimates that are varying, most seem to be in the range of $800m – $1.5b. This is exerting downward pressure on ETH prices. The imminent approval of a Bitcoin ETF is also prompting a shift in focus towards ETH ETFs. Once Celsius concludes its selling spree, market observers may anticipate an uptick in ETH volatility, with expectations leaning towards upward movements all thing equal.

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The week ahead

Monday, 8 January

• EA – Various sentiment/confidence/expectations

Tuesday, 9 January

• U.S. – Balance of Trade

Wednesday, 10 January

• CN – Loan figures
• U.S. – Oil figures
• Final Deadline for ARK Invest and 21 Shares BTC spot ETF

Thursday, 11 January

• U.S. – Inflation figures

Friday, 12 January

• CN – Inflation Figures
• CN – Balance of Trade
• U.S. – PPI