“Central Bank Super Week” Did Not Exceed Market Expectations: Weekly Market Review From Blofin

Blofin

During this "Central Bank Super Week", there were no major changes in the crypto market, but several indicators show that the market has begun to change quietly. The CPI and GDP data from multiple countries will be released next week, which will bring clearer inflation and economic recovery judgments to the market.
  • No matter from the perspective of price or volatility, this "Central Bank Super Week" has the lowest impact on the crypto market since 2021.
  • A number of indicators show that the market has begun to adopt a cautious attitude towards the pricing of cryptos due to the contraction of market liquidity.
  • Future changes in crypto prices will depend on investors' judgment on inflation and economic recovery.

“Everything Is Still Expected”

This week is an important moment for the crypto market. As central banks held meetings one after another in early November and announced their monetary policies for the next period of time, this time are called "Central Bank Super Week" by traditional markets. Usually, the impact of policy changes on asset pricing reaches its peak and pushes up market volatility.

Among these central banks' resolutions, the Federal Reserve's FOMC interest rate resolution is crucial. The Federal Reserve's interest rate resolution in November did not exceed market expectations: the debt reduction will start at $15b per month, but the interest rate will remain unchanged. Major capital markets such as Britain, Australia and Europe also kept interest rates unchanged for the time being and were generally optimistic about inflation and economic recovery.

Surprisingly, in this "central bank super week", the crypto market has not seen major changes. Although the price of mainstream cryptos fell briefly at the moment of the announcement of the FOMC resolution (Bitcoin was once close to the $60k mark), it quickly returned to normal, which may be due to the programmatic trading behavior that triggered the sale of keywords. From the perspective of volatility, regardless of historical volatility or implied volatility, the change is only about 5%. The warm-up from Sept that central banks will begin to tighten liquidity is obvious, and the market has already incorporated the results of this meeting into pricing — whether it is traditional markets or crypto markets.

Investors Tend to Be Cautious

However, several indicators show that the market has begun to change quietly.

The skewness data of bitcoin and Ethernet options fell sharply this week and concentrated on options far away from their expiration dates. This usually indicates an increase in bearish sentiment in the market. Worries about shrinking liquidity have begun to emerge in the options market.

On the other hand, the term structure of the futures market has also changed. Although the premium rate of mainstream cryptos is still at an all-time high, investors seem unwilling to pay more premium for futures with relatively long maturity dates-which has led to the disappearance of the rising part in the futures term structure.

From the perspective of price changes, investors are also becoming cautious in the pricing of cryptos. Compared with the beginning and middle of the year, the current low volatility indicates that these assets lack upward or downward buying/selling momentum. At a time when compliance is gradually improving, the caution of the market undoubtedly comes from worries about the future liquidity trend.

With the end of the “Central Bank Super Week”, next week, CPI data and GDP data from multiple countries will be released one after another, which will bring clearer inflation and economic recovery judgments to the market. If inflation data is in line with expectations (that is, "inflation is temporary"), central banks may not take more aggressive measures. However, if high inflation continues and economic recovery is not satisfactory, even if risk aversion continues to benefit crypto in the short term, but this also means that the central banks may adopt some radicalization measures, such as raising interest rates in advance, etc., which requires attention.

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Blofin

Blofin is a leading global financial service organization. With the core concept of "data-driven, stable value-added", Blofin is committed to providing financial services and trading institutions for high-net-worth clients, exchanges, hedge funds and other institutions service etc.