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Macro volatility has intensified. The NASDAQ has declined by 10% from its peak as the Magnificent 7 pulls back. FX carry trades like long USDJPY and short USDMXN are being unwound as volatility increases. The VIX topped at 19.50 after trading in a range of 12-14 for the past 2 months.

Several factors are contributing to this heightened market uncertainty:

  • Value at Risk (VaR) Shocks. Risk managers are forcing traders to trim positions. Increased selling causes prices to fall, which then causes volatility to increase in a feedback loop.
  • Elevated Equity Valuations and Lofty Earning Targets. When companies fail to hit targets, participants start to second guess their projections for the future. This is exemplified by Microsoft’s recent AI cloud revenue miss causing shares to decrease by 8% after hours.
  • Global risk-off sentiment. AUDUSD and NZDUSD have collapsed despite the recent USD weakness. Commodities such as Oil and Copper have declined by 10-15% for the month, due to increased fears of a global slowdown.

We anticipate increased volatility ahead of tonight’s FOMC. We do not expect a cut and place higher importance on the statement and Powell’s presser after. Our base case is for 1 cut in September and December each. We remain wary of a deviation from current expectations, which would trigger risk-off moves across all assets, including crypto. Such a scenario would indicate the Federal Reserve’s perception of heightened economic challenges. In the crypto space, we finally saw net inflows of USD33.7mil in ETH spot ETFs. This gave a much needed boost to ETH prices which have been lagging behind BTC for the past month. Nonetheless, we foresee continued outflows from ETHE in the next 2 weeks.

The recent movement of 30k worth of Silk Road BTC by the US government has introduced uncertainty into the cryptocurrency market.

Trade Idea

BTC has failed to break above the 70k for the 6th time. We maintain our view that BTC will continue to trade within a range. ETH longs are preferred as ETHE outflows subside over the next 2 weeks and ETH catches up to BTC. We target a break of 4000 which is the 2024 high.

ETH Win-Range

  • Get paid 5.5x returns if ETH fixes within the range.
  • Maturity: 30AUG24
  • Range: 4k to 4.5k
  • Payout: 5.5x
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Disclosure: The authors of this content and members of Nansen may be participating or invested in some of the protocols or tokens mentioned herein. The foregoing statement acts as a disclosure of potential conflicts of interest and is not a recommendation to purchase or invest in any token or participate in any protocol. Nansen does not recommend any particular course of action in relation to any token or protocol. The content herein is meant purely for educational and informational purposes only and should not be relied upon as financial, investment, legal, tax or any other professional or other advice. None of the content and information herein is presented to induce or to attempt to induce any reader or other person to buy, sell or hold any token or participate in any protocol or enter into, or offer to enter into, any agreement for or with a view to buying or selling any token or participating in any protocol. Statements made herein (including statements of opinion, if any) are wholly generic and not tailored to take into account the personal needs and unique circumstances of any reader or any other person. Readers are strongly urged to exercise caution and have regard to their own personal needs and circumstances before making any decision to buy or sell any token or participate in any protocol. Observations and views expressed herein may be changed by Nansen at any time without notice. Nansen accepts no liability whatsoever for any losses or liabilities arising from the use of or reliance on any of this content.