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BTC and ETH

Last week, crypto prices have tested the topside of the recent range with BTC trading up to 20,500 and ETH to 1,400 only to mean revert and test recent lows of 18,920 in BTC and 1,260 in ETH this week. As expected, with little to no crypto narrative to follow, crypto has been driven purely by macro forces.

In that regard, all eyes are on the Fed and by extension on CPI print this Thursday, where uncertainty remains high.

CPI

Sell-side economists are predicting a rise of approximately 0.4% m/m and 6.5% y/y in core CPI, carried by strong shelter inflation. We think that as long as labour demand remains robust (as shown by last week's upside surprise in NFP) and CPI prints high, Fed will continue to keep financial conditions tight, with no pivot in sight.

USD

USD continues to remain bid, as real returns on dollar outperforms every other asset class YTD. Commodities and Precious Metals showing grim figures with WTI, Lumber, Copper, Palm Oil and Gold down in nominal terms

Correlation across assets

Amalgamation of global macro sentiment has driven correlations across assets back to extremes. BTC correlation with equities and gold (positively correlated) at all-time highs and USD (inversely correlated) at all-time lows.

Puts and Calls

In the crypto vol space, we are seeing heavy demand for front-end as market is buying up gamma ahead of Thursday's print. Most were buying puts (often funded with short calls) and preference was BTC over ETH.

Q4 predictions

Ultimately, as the liquidity tap is tightened fully, core CPI remains sticky above target, and geopolitical risks start to weigh in more, Q4 will definitely be more challenging.

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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.