Ready, set, brace! | On-Chain Report
Is a drop down to a 50bps rate hike considered a "pivot"? Will JPOW cut the markets some slack and inject some much needed liquidity? Read now!
Expectations of 75 basis points Federal Reserve interest rate hike on Wednesday
Additionally, the Fed may also signal a reduction in the size of its rate hikes in December as there is now risk of overtightening.
In fact, many analysts believe that if Fed Chairman, Jerome Powell, remains excessively hawkish it could trigger a violent response in markets if interest rates were to reach 5% in March 2023.
In his briefing on Wednesday, Federal Reserve Chairman Jerome Powell is expected to emphasize the Fed's desire to combat rising inflation through tightening monetary policy.
The recent optimism in markets sparked by the idea of a Fed pivot has led to some peculiar changes in BTC and ETH Supply on Exchange (SoE) - potentially hinting at some short-term developments to the upside.
Green: BTC price
Purple: BTC SoE (as % of total supply)
Bitcoin’s SoE observed a decline and is moving strongly below the EMA(30,50) area, indicating that this metric is still within the downtrend since 29 September. [BTC: SoE 8.264%]. Contrary to last month’s environment, we are starting to see the expansion of bearish development on this metric, and the distance between EMA’s(30, 50) is growing larger. The metric’s movement itself also exhibited interesting behaviour after declining in a step-like pattern, something we might only see when there is a large volume of transactions in a relatively short time.
In this sense, we hold the view that the bearish condition of BTC SoE will remain valid as long as it does not break back above the 8.85% mark – EMA(50).
Red: ETH price
Purple: ETH SoE (as % of total supply)
Ethereum SoE also observed a strong decline as the metric remains below EMA(30,50) resistance, indicating an impending bearish movement [ETH: SoE 14.381%]. It is also noted that Ethereum’s Supply on Exchange is forming a “natural” U-shaped curve, contrary to the stepped movement of Bitcoin.
We consider Ethereum’s SoE to be in the downtrend, and this condition will be sustained unless it breaks above the EMA(50), which has now declined to 14.64%.
From the long-term perspective, we noted that Bitcoin SoE is making a relatively strong move to the downside, as ∆delta (overall change) continues gaining an impressive momentum, now sitting at 1.571%. A decrease in delta implies that more Bitcoin is being withdrawn from public exchanges, which may affect the structure of order book depth and become a foundation of a bullish trend. We remain bearish on the current SoE structure until it crosses above its EMA (50), which is at 10.2%.
Our view regarding the bullish nature of Ethereum SoE is still valid since the metric has remained above its EMA(30,50) area.
However, given the gap between EMA(30) and EMA(50) is relatively small, we hold this opinion with a low confidence score as it would not take much effort to flip the current condition compared to the previous environment.
As a result, we believe Ethereum continues to trend within a bearish territory in the long term. Ethereum SoE will only flip bullish if it falls below the EMA(30), which currently sits at 13.00%.
ALTPERP gets caught in the middle
The FTX’s Altcoin Index basket (ALTPERP) made an impressive push and broke above all the short-term resistances (4H-Daily) [FTX:ALTPERP 1584]. From here, the index will have a gap to move between the lowest support (4H) and the next available resistance (Weekly). Since 2021, ALTPERP has only tapped resistance once before (30 March-05 April 2021) and the index rejected it harshly.
Given that this area is the last line of defence for bears, we conclude that crypto has reached an incredibly crucial moment and whatever direction comes next is bound to be violent.
Limit for the Bulls (SUPPORT): 1919.83 (11.67% from here)
Limit for the Bears (RESISTANCE): 2684.57 (23.48% from here)
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