Loader
logologo
Alpha Zone
Analysts
My Reading List
Log in
DeFiGaming & MetaverseInfrastructureMarketsNFTs
QCP Market Update
QCP Capital
main

As we gear up for an action packed evening in Singapore time, markets are bracing for a series of potentially market-moving events.

Our first event is CPI, with core CPI predicted to come in at 5.6%, higher than the previous reading of 5.5%, and headline CPI expected to come in at 5.1% versus the previous reading of 6.0%.

Although headline CPI is expected to be lower than the previous month, most economists' estimates are at the bottom of the range, however the market expectation is for a higher than expected number.

We are keeping in mind that the Fed is still largely data dependent and has warned against taking its foot off the pedal early. Markets are 75% priced for a 25bps hike in May. Therefore this number carries great importance either way. A lower than expected print will likely take off the hike and lead to a risk asset rally.

Following CPI, FOMC minutes will be released at 6pm UTC. Investors will closely scrutinize the reasons for the Fed's downshifting and what they will keep an eye on in terms of the banking sector, liquidity, and overall market performance. While data dependency on inflation will be a critical factor, comments about bank stability will carry weight, in particular how many rate hikes the Fed see the current credit tightening as being equivalent to.

Lately, crypto as an asset class has not been a good reflection of macro markets. To that end, crypto has its own event risk following the release of FOMC minutes. Shapella is estimated for April 12th 10pm UTC (Epoch 194048).

We fail to see what the bullish case can be for this event as those at the front of the queue are likely to sell spot, while those further back will be hedging via perps/futures if they have not already done so. The market has already seen bearish price action in anticipation of this event, with ETH underperforming BTC in recent weeks.

ETHBTC has broken through the key support level of 0.658, and can potentially head back to 0.0553 (Chart below), as continued and sustained spot selling pressure in thin markets for days after Shapella leads to further bearish price action on ETH. This can also potentially drag down the broader market.

Chart 1: ETH / BTC
Source: Chart 1: ETH / BTC

Most importantly, while transaction volumes on the Ethereum network have picked up since FTX's collapse, we have not seen a substantial increase (Chart below) that can rival bull market volumes. As the amount of ETH burnt is linked to transaction volumes, the current low burn rate only marginally supports the bull case for ETH at this point in time (Chart below).

Chart 2: Average Daily ETH Burn (by segment) – QCP Capital
Source: Chart 2: Average Daily ETH Burn (by segment) – QCP Capital
Chart 3: Average Daily ETH Burn (since EIP-1559) – QCP Capital
Source: Chart 3: Average Daily ETH Burn (since EIP-1559) – QCP Capital

Looking at technicals, ETH is also printing a double top on daily timeframes, after rejecting from 1950 (Chart below).

Chart 4: ETH / USD
Source: Chart 4: ETH / USD

On the options side, heavy buying flows in calls and call spreads were observed during previous BTC and ETH rallies. However, the recent break towards 30k did not see the same buying activity. In fact, we saw participants taking profit on their call spreads which could possibly signal that participants may be seeing a market top for now.

Furthermore, we are starting to see foundations and miners, who traditionally sell topside, return to the market and add topside supply.

You might also like
Article cover
QCP New York Colour
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.